Xiaomi reported earnings of only $56 million in 2013, one-tenth what WSJ reported and 1/150 Apple's

Posted:
in iPhone edited February 2015
In November, the Wall Street Journal reported that Chinese smartphone maker Xiaomi had earned $556 million based on "internal documents." Reuters is now reporting that the company actually earned an order of magnitude less, based on the firm's public filings.

Xiaomi

The reports of my profitability have been greatly exaggerated

Reuters reported today that, according to Chinese securities filings by Xiaomi associated with the firm's investment in appliance maker Midea Group, the high volume smartphone maker reported earning a profit of 347.48 million Chinese yuan ($56.15 million U.S.) on revenues of 26.58 billion yuan ($4.3 billion).

That's one-tenth the earnings and profits that were reported last month, based on "a confidential document viewed by The Wall Street Journal" that its reporters said banks were being shown by the company "in its recent pitch to raise $1 billion in loans for overseas expansion or acquisition."

After reporting that Xiaomi had earned "3.46 billion yuan ($566 million)" on revenues of "27 billion yuan," the Wall Street Journal concluded that it "shows that Xiaomi's net profit nearly doubled last year, making it a lucrative business in an industry where most players selling cheap handsets struggle to break even."

The Wall Street Journal noted that "a Xiaomi spokeswoman declined to comment" on the initially reported earnings. The paper marveled at how Xiaomi could be making so much money on smartphones that start around $114, with the company's Mi4 flagship priced at just $327.

"A possible explanation for Xiaomi's ability to squeeze out so much profit while selling affordable phones is its inexpensive but efficient marketing tactics," the Wall Street Journal reporters Prudence Ho, Lorraine Luk and Juro Osawa collectively speculated.

Panic on false rumors

The Wall Street Journal had made it clear that even with greatly inflated profits and revenues, Xiaomi still represented a sliver of the annual revenues and profits of Apple and Samsung (as pictured in its graphic below).

Xiaomi


However, the idea that the Chinese discounter could be experiencing serious growth in profits while selling low end devices created a credible hope that Xiaomi could become a serious threat to Apple by expanding outside of China.

Based on the inflated figures reported by the Wall Street Journal clickblog Business Insider initially published an entry titled, "Xiaomi Is Creating An Uncertain New World That Apple Must Learn To Live In," which gravely warned that "the news that Chinese smartphone manufacturer Xiaomi makes a healthy profit could horrify executives at both Samsung and Apple."

Apple earned 150x as much as Xiaomi in China

The reality, however, is that years after starting to ship relatively large volumes of smartphones in China, Xiaomi is still not very profitable at all. Apple reported revenues within Greater China of $25.4 billion in fiscal 2013, over six times as much as Xiaomi actually reported earning in China, and operating income of $8.5 billion, over 150 times as much as Xiaomi actually earned in 2013. The reality, however, is that years after starting to ship relatively large volumes of smartphones in China, Xiaomi is still not very profitable at all

While Apple's profit margins in China were about 33 percent, Xiaomi earned a profit margin of less than 2 percent. That calls into serious question how sustainable Xiaomi's flash sales of extremely low cost phones can possibly be in China, let alone how it could export the same business model to other countries.

Additionally, Xiaomi's business model of unabashedly copying other makers has run the company into a sales ban in India based on patent infringement of Ericsson intellectual property, a market the company strategically targeted for expansion.
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Comments

  • Reply 1 of 122
    "...that Apple must learn to live in"
    Right. More doomsayers from those who thought Apple couldn't possibly maintain its Mac business against cheap PCs. Yet Macs sales are up.

    As for Xiaomi's margins on its cheap-ass Android knock-offs, let's see which company runs a tighter supply chain without compromising quality.
  • Reply 2 of 122

    It’s more than they deserve.

  • Reply 3 of 122
    Well that's bad news for Xiaomi... and Samsung has certainly seen better days. Apple seems to be doing well, though.

    So what about the other 60 smartphone manufacturers?

    Acer, Alcatel, AllWinnner, Amazon, Asus, Blackberry, BLU, Celkon, Coolpad, Cubot, Dell, Evolio, G-Tide, Gigabyte, Gionee, Google, Goophone, Haier, Hike, HP, HTC, Huawei, iBall, Infinix, InnJoo, Intex, iOcean, Jiake, Jiayu, Jivi, Jolla, Kabonn, Karbonn, Kingzone, Kyocera, Lava, Lenovo, LG, Meizu, Micromax, MLais, Motorola, Neken, Nokia, OnePlus, Oppo, Opsson, Panasonic, Solo, Sony, Spice, Star, TCL, Tecno, THL, Umi, Vertu, Vivo, Voto, Xolo, Zopo, ZTE

    Any good news for them?

    I honestly don't see how the smartphone industry can be sustainable with over 60 companies... but only 2 or 3 actually making money.

    Are there any other industries that have many players but so few making money?
  • Reply 4 of 122
    gtrgtr Posts: 3,231member

    Why'd they call the company Xiaomi?

     

    Because 'A Company That Works So Closely With The Chinese Government That They Practically Are The Chinese Government" was too big to print on the exterior of a phone...

     

    From Taiwan recently:

     

    "Taiwan's National Communications Commission found that two models of mainland China-made smart phones were transmitting data to servers overseas "many of which are in China", creating what Taiwanese media described as a 'security risk'."

  • Reply 5 of 122
    jfanningjfanning Posts: 3,397member
    Well that's bad news for Xiaomi... and Samsung has certainly seen better days. Apple seems to be doing well, though.

    So what about the other 60 smartphone manufacturers?

    Acer, Alcatel, AllWinnner, Amazon, Asus, Blackberry, BLU, Celkon, Coolpad, Cubot, Dell, Evolio, G-Tide, Gigabyte, Gionee, Google, Goophone, Haier, Hike, HP, HTC, Huawei, iBall, Infinix, InnJoo, Intex, iOcean, Jiake, Jiayu, Jivi, Jolla, Kabonn, Karbonn, Kingzone, Kyocera, Lava, Lenovo, LG, Meizu, Micromax, MLais, Motorola, Neken, Nokia, OnePlus, Oppo, Opsson, Panasonic, Solo, Sony, Spice, Star, TCL, Tecno, THL, Umi, Vertu, Vivo, Voto, Xolo, Zopo, ZTE

    Any good news for them?

    I honestly don't see how the smartphone industry can be sustainable with over 60 companies... but only 2 or 3 actually making money.

    Are there any other industries that have many players but so few making money?

    Nokia doesn't make phones, you might have to update your list.
  • Reply 6 of 122
    fallenjtfallenjt Posts: 4,017member
    Only idiots believe in this company whose business model based on copying
  • Reply 7 of 122
    relicrelic Posts: 4,735member
    jfanning wrote: »
    Nokia doesn't make phones, you might have to update your list.
    They will most certainly start making smartphones again in 2015 but just smartphones.
  • Reply 8 of 122
    jfanning wrote: »
    Nokia doesn't make phones, you might have to update your list.

    Thanks for pointing that out.
  • Reply 9 of 122
    sflocalsflocal Posts: 5,463member
    Quote:

    Originally Posted by fallenjt View Post



    Only idiots believe in this company whose business model based on copying



    Xiaomi was a sham to begin with.  Scum just like Samsung.  Xiaomi being under the "protection" of China, they can pretty much publish anything they want and without penalty or prosecution.

  • Reply 10 of 122

    Could someone, seriously, explain to me how a Chinese knock-off with Android is in any way a 'threat' to Apple, please? I shall now seriously consider the implications of swapping from iOS to Xandriomi...

     

    None of the apps, music of movies I've bought transfer over.

    None of my privacy is assured.

    Strange error messages that pop up in Chinese.

    A great looking phone that looks like the iPh5...

    ...with specs that don't run games as well as the iPh5

    Google has all my data to share with its friends.

    And this thing will never get updates, ever.

     

    HUGE threat. GIGANTIC even! Of making Apple laugh themselves silly, perhaps.

     

    And this article fails to mention that most of the cash Xiaomi functions on is through government subsidies. I suspect profit figures will have "-"'s all attached to them otherwise...

  • Reply 11 of 122
    joshajosha Posts: 901member

    Is this story another exampe of the WSJ publishing crap initially, then more crap with their follow up report ?

    Of course a China company can publish anything the China Gov wants it to;

     so perhaps the WSJ should be more careful on reports from China companies.

     

    As for the Xiaomi phone, it must be the spyware phone of the year.

    With China Gov Spyware on top of Google android Spyware, these phones won't miss anything you do !!!

  • Reply 12 of 122

    I watched a Xiaomi Keynote, as I was thinking it was great a new company was trying hard.

     

    But then the guy running the show is wearing a blue t-shirt, and I thought, 'Oh'.

    And then they even copied Apple's fonts and graphics from its keynotes: 'WTF'.

    And then the chamfered edges came out, and the presenter guy is sweating, and I gave up, cursing Xiaomi the same whay I did Samsung.

     

    Creativity isn't something that can be replicated, and I think X and S may be entering the reality of that statement.

  • Reply 13 of 122

    It's so Samsung! I'm enjoying the gradually worsening Samsung products and its falling earnings. I wonder how huge a discount they will give Apple to reproduce their chips again? ;) Xiaomi has no where to go back on, unless it's bought by another company or by the governement subsidising its activities.

  • Reply 14 of 122
    joshajosha Posts: 901member
    Quote:

    Originally Posted by Brakken View Post

     

    Could someone, seriously, explain to me how a Chinese knock-off with Android is in any way a 'threat' to Apple, please? I shall now seriously consider the implications of swapping from iOS to Xandriomi...


    Shouldn't an explanation come from you, as how someone so smart bothered trying out one of their phones.

    I value my time more to even bother giving it a second thought.

    We all know android is Google Spyware and most know that China is a huge computer SPY !!!

    Their phones should be called Spydriomi.

  • Reply 15 of 122

    Just for fun, I tally the different models of phones when on the train. It usually comes out as minimum 3 to 1, max 9 to 1. I'm not sure at what point other phone makers are a 'threat' when for every three iPhones, every other company - including flip phones - add up to only one! I hope Apple eats them all for breakfast!

  • Reply 16 of 122
    xixoxixo Posts: 430member
    Someone at the WSJ needs a lesson in foreign exchange rate calculations.

    Their reporters heard "three hundred fifty million" and immediately ran out of the room to inform the media without listening to the end of the sentence.
  • Reply 17 of 122
    apple ][apple ][ Posts: 9,233member

    What a truly crappy and pathetic company.

     

    This is the company with that little man who's a pathetic Chinese Steve Jobs wannabe. What a joke.

     

  • Reply 18 of 122
    wingswings Posts: 261member

    Isn't it funny that 9 times out of 10, when an article appears that's either anti-Apple or pro-competition, the authors have names that are spelled kinda foreign?

  • Reply 19 of 122
    tmaytmay Posts: 5,006member
    Quote:

    Originally Posted by Relic View Post





    They will most certainly start making smartphones again in 2015 but just smartphones.

    What I read is that Nokia has a non-compete with Microsoft until December 31, 2015, so arguably 2016, but MS gets the Asha and Lumia brands. I don't ever see Nokia making a strong comeback in the smartphone market, albeit the name and designs can certainly be licensed and might be valuable for a Chinese OEM.

  • Reply 20 of 122
    enzosenzos Posts: 344member
    " "Xiaomi Is Creating An Uncertain New World That Apple Must Learn To Live In," "

    WSJ: adding new meaning to "Egg firmly on face".
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