Hugo Barra explains why Xiaomi's devices are all so cheap

Hugo Barra explains why Xiaomi's devices are all so cheap
With Xiaomi gaining momentum at the expense of traditional OEMs such as Samsung, one might wonder what exactly is driving that onward march. Almost assuredly, the answer you will all reach is one: It's all about the way its phones are priced.

But you'd think that if Samsung was really feeling pressured, it could just slash its prices, too, right? Not really – at least not unless it adopts as radically different a strategy as the one Xiaomi employs. For example, as some of you will already know, Xiaomi's products are pretty much exclusively sold through its web stores, which is a massive money saver. Indeed, this way the company doesn't incur any costs related to staffing and general store management (including warehousing), not to mention that it entirely bypasses distributors and third-party retailers, both of which seek profits of their own and inflate the price.

That's not the only way in which Xiaomi saves costs, however. Another very important component to it is their products' average life cycle. Xiaomi's own Hugo Barra spoke to TechCrunch on that very topic:


And why are these price cuts possible? Because the hardware components' cost drops down the road, especially in an industry as heavily characterized by rapid improvements in tech. This means that the core of that one Xiaomi phone costs significantly less half a year later, allowing for equally significant savings that, in turn, let the company go for a price cut. This effect is further amplified by the fact that Xiaomi keeps a very narrow smartphone portfolio in comparison with pretty much every mainstream Android manufacturer. 

Finally, unlike the rest of the industry (and a lot alike OnePlus), Xiaomi is driving its marketing campaigns on what is essentially zero budget. Instead, the company depends on social media and word of mouth to create hype and awareness for its products. Although it's unclear if Xiaomi is making much on services, it is also worth pointing out that its proprietary app store contains tons of premium content that is only available for cold, hard cash that goes right into its pocket. 

Combine all of these strategic choices, and you can see why Xiaomi is able to sell its otherwise high-end smartphones at as low costs. 


FEATURED VIDEO

50 Comments

1. SyCo87

Posts: 289; Member since: Sep 19, 2013

No R&D expenses.

2. HugoBarraCyanogenmod

Posts: 1412; Member since: Jul 06, 2014

And Apple's r&d mostly paid to that jony ive. Overpaying r&d to slackers is a waste for consumerism

6. tech2

Posts: 3487; Member since: Oct 26, 2012

Not really overpaying if his design being copied so blatantly in China. Basically he is designing phones for Apple and chinese manufacturers. So yes, whatever they are paying to Jony Ivy is well worth it. The only reason they are getting away with this theft is because they know Chinese government is infamous for protecting thefts and there is basically no such thing as original design. I am not a big fan of Apple myself but lets call spade a spade. http://www.phonearena.com/news/Xiaomi-needs-to-try-much-better-not-to-look-like-a-blatant-Apple-copycat_id58490

16. Kruze

Posts: 1285; Member since: Dec 30, 2014

Those Chinese manufacturers who copy Apple's design is because they wanna be successful like Apple, but they don't know that the design is not what made Apple successful. And Jony Ive is just too confident with his designs, he thinks his designs are the best, which is not. Glad to see that Chinese manufacturers like Huawei, Oppo and Vivo already learnt their lesson, and using their own designs. If you wanna be successful, copying is not the way. It just makes yourself look pathetic and you won't get any respect. The reason why I didn't include Xiaomi in the "Chinese manufacturers who already learnt their lesson" is because of the MiPad and MIUI that looks a bit like iOS (but I still like it though).

32. techloverNYC

Posts: 601; Member since: Nov 20, 2012

Too bad it seems like Xiaomi is making way more money then all the companys you just mentioned. Why would Xiaomi change its tactics when its still making good money?

41. mixedfish

Posts: 1545; Member since: Nov 17, 2013

Xiaomi barely made any money in the last financial year. http://www.forbes.com/sites/parmyolson/2014/12/15/xiaomi-profit-margins-samsung-china/ They're a 'loss leader' and more interested in revenue volume and market disruption.

40. Mercedes-Benz

Posts: 403; Member since: Jan 18, 2015

Put it this way , xiaomi is more successful than one plus because they are copycat of apple's design . For the average user they don't care but I would much rather take one plus's product

23. PhoneCritic

Posts: 1345; Member since: Oct 05, 2011

"The only reason they are getting away with this theft is because they know Chinese government is infamous for protecting thefts and there is basically no such thing as original design." Agree.

36. Diezparda

Posts: 941; Member since: Oct 23, 2013

why chinese manufacturer copying Apple? it's not because the design looks so damn good, because it's Apple. Famous brand and it's popular among hipster. My younger cousin want it so badly, her parent already gave her worthy $1000 Asus Zenbook notebook, she's not satisfied though. She want APPLE logo on it!! When i ask her? she simply said all my friends own it. Sigh...

44. Mercedes-Benz

Posts: 403; Member since: Jan 18, 2015

If she wants a Macbook , why not her parents give her that the first place . I love my macbook it has keyboard , battery life , performance consistency and the trackpad is like no other

9. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

Hugo state that direct selling to consumers keep the selling price low and it's correct. SyCo87 do you know the exact amount Apple spend on R&D? Most of Apple designs can be found in earlier products apple did a great job repackaging it and marketing it mostly on a higher price bracket. http://www.businessinsider.com/apple-braun-inspiration-2012-9?op=1

11. jaytai0106

Posts: 1888; Member since: Mar 30, 2011

R&D cover more than just design of the phone. It covers the software, components layout, chip design (AX chip Apple uses), and more. But Direct sell and other business practice to cut spending will help Xiaomi goes a long way!

38. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

Like I say you could only comment if you know the exact amount XiaoMi and Apple invested. Otherwise is just a bias fathom remark.

49. jaytai0106

Posts: 1888; Member since: Mar 30, 2011

Well, Xiaomi only holds around 12 patents... that says a lot.

13. SuperNova

Posts: 649; Member since: Jan 15, 2015

Also it is supported from the Chinese govt in term of lower tax. But the funniest thing is that it claim itself as innovative company when it only uses components from 3rd parties makers.

22. BlackhawkFlys

Posts: 904; Member since: May 07, 2014

They calls themselves innovative not because of their hardware but because of their MIUI. MIUI has a lot of useful features which you won't find in any other Android or iOS. Plus Apple also uses components from 3rd parties but calls itself innovative.

43. mixedfish

Posts: 1545; Member since: Nov 17, 2013

Put a few apps and tweaks in there, and apparently it's not 'android' it's 'MIUI'. Innovation right?

3. itsdeepak4u2000

Posts: 3718; Member since: Nov 03, 2012

It's a great strategy. Very good for consumers. And also build quality is almost the same of other big OEMs..

14. SuperNova

Posts: 649; Member since: Jan 15, 2015

Yes, it's a smart move from a copycat company. It spends nothing when the real innovator is working so hard for years and finally get stolen within a month.

17. imMature

Posts: 87; Member since: Sep 04, 2013

They get the jobs done and satisfies many people. Who cares... Well apparently you. Haha.

19. Extraneus

Posts: 121; Member since: Jun 02, 2012

You will too, when the innovative manufacturers go belly up and there aren't anyone competent left to copy...

20. SuperNova

Posts: 649; Member since: Jan 15, 2015

Satisfied many people, but also disappoint its workers with low wage.

37. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

What you said about low wages also applies to Apple manufacturing partners. You views are very bias against XiaoMi. If you are happy with you Apple products why you get yourself so bothered on other brands.

25. BlackhawkFlys

Posts: 904; Member since: May 07, 2014

Well we get a great device probably better than the iPhone at half of the price. Who cares wether they copy or not. By the way Apple and any other manufacturer (including Samsung & Xiaomi)just want to make money they do not care about the consumer so why should we care if there work has been stollen or not.

39. dc0321

Posts: 24; Member since: Nov 21, 2012

yo blackhawk .i logged in to give u a thumbs up. cant agree more

46. Extraneus

Posts: 121; Member since: Jun 02, 2012

A truly sick mindset... I hope you apply the same logic to your own workplace; after all, you're just in it for the money as well...!

4. Anshulonweb

Posts: 468; Member since: Feb 07, 2014

xiaomi devices are really cheap and people often question the quality and durability of products...... i and my friends are using xiaomi phones for long time and all i can they is that,they are totally worth it... trolls will be commenting on this article about quality of xiaomi phones,all i can say is that please use the phone before giving your views

10. HugoBarraCyanogenmod

Posts: 1412; Member since: Jul 06, 2014

Anti-China trolls continue to resist their temptation towards Chinese phone even it cost them $300 for a 3gb ram, 4000 mah battery, 5inches ++ display with more than 1080p resolution, as well as 13mp selfie camera. Instead, they're happy to lie themselves for paying $600 to the so called branded phone that end up bended, battery explosion, screen shattered , lags, freezed and bricked

15. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

I am happy to buy XiaoMi and other China branded phone. However, I also respect choices. People can buy whatever brand they want with their hard earned money.

18. iLovesarcasm

Posts: 589; Member since: Oct 20, 2014

Yes it is really tempting to use Meizu, I will take risk buying a substandard phone.

Latest Stories

This copy is for your personal, non-commercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers at https://www.parsintl.com/phonearena or use the Reprints & Permissions tool that appears at the bottom of each web page. Visit https://www.parsintl.com/ for samples and additional information.