Text / Fang Jun
On May 3, Xiaomi submitted a listing application in Hong Kong. It is estimated that the listed company will have a valuation of more than US$70 billion. The most concerned Chinese technology company after the BAT (Baidu, Alibaba, Tencent) Xiaomi finally went public.
It is a "national company," and is also a company "in the era of mobile Internet".
At the front of the prospectus, Lei Jun’s letter to shareholders, “Who is Xiaomi, Why Does Xiaomi Fight?” sparked an upsurge.
"Who am I?" This question has attracted Xu Xiaoping, Guo Guangchang, Wang Feng and others to write essays on the same topic. When Xiaomi launched the mobile phone business seven years ago, many people followed the history of personal mobile phones on Weibo.
Hardware company, or Internet company?
"Who is Xiaomi?" is indeed the topic most concerned by people for many years.
Lei Jun’s letter to shareholders answered some of the questions. Xiaomi’s prospectus answered more, but it also brought new questions.
Lei Jun wrote:
"Millet is not just a hardware company, but an innovation-driven Internet company." Specifically, Xiaomi is an Internet company that focuses on mobile phones, smart hardware, and IoT platforms. ”
IoT refers here to consumer IoT products.
It is a hardware company or an Internet company. This topic is very realistic. Usually Internet companies can obtain higher valuations.
But from another perspective, the discussion is fierce, but it may just be a fun topic game:
On the one hand, Lei Jun’s expression clearly stated that Xiaomi’s business focus was “mobile phones, smart hardware, and IoT”.
On the other hand, in terms of analogy, Apple, which is also based on hardware and is an example of Xiaomi's learning, has been the company with the highest market value since 2011. "Apple is a company of the era."
The answer in the prospectus
In fact, in the Xiaomi's prospectus, it uses business and figures to give "who is Xiaomi?" the past and present answer to this question.
Xiaomi's financial report divides itself into four business segments:
IoT and consumer products
In 2017, the revenue and proportion of each segment's business operations were: smartphone revenue was RMB 80.56 billion, accounting for 70.3%; IoT and consumer product revenue was 23.45 billion, accounting for 20.5%; Internet services were 9.896 billion, accounting for 8.6%; others accounted for 0.6. %.
From the percentage, we can also see that the proportion of smartphones is declining. In the past three years, they accounted for 80.4%, 71.3%, and 70.3% respectively. However, the proportion of IoT and consumer products rather than Internet services has increased. The Internet service has been used for the past three years. The proportions were 4.9%, 9.6%, and 8.6%, respectively.
Triathlon Business Model
The other answer to the question “Who is Xiaomi?” is the company's business structure. Lei Jun’s letter and Xiaomi’s prospectus also gave clear answers.
This answer is consistent with people's understanding of Xiaomi for a long time. Lei Jun said that Xiaomi’s business strategy is “the triathlon business model” and the so-called triathlon refers to the three “millet's” and “cooperate with each other”. Business pillar:
On the hardware, Xiaomi has already formed a millet ecosystem with a mobile phone as its core:
The innermost circle is a smart phone, and the outer layer is a mobile phone accessory such as a charging treasure, and then it is a TV, a wristband, an air purifier, etc., and the outermost is a pen, a towel and other consumer products.
We can see that Xiaomi has expanded its own product line, or formed an ecological chain of millet by way of investment incubators. Xiaomi's eco-chain company Huami Technology first listed Xiaomi on the New York Stock Exchange on February 8.
Xiaomi formed such an ecosystem because it creatively learned that Apple has established online and offline sales channels. It has established online and offline channels better than Apple and formed the so-called "new retail" business and support. More product categories.
Although the offline Apple Store is a benchmark for retail stores and brand building, it is far from one of Apple's business pillars.
Internet services have similar meanings for Apple and Xiaomi:
Hardware and software form a complete product;
Hardware annual iteration, software rapid iteration;
Software forms a moat of hardware services;
The software or content may bring a certain amount of income.
We can also use software to refer to Internet services. For Xiaomi, software applications include Android-based MIUI, Xiaomi App Store, and others.
Although there is no operating system, Xiaomi is actually a typical Internet platform company. Unlike hardware-only companies, it uses hardware and software to form an Internet platform. On the other side of the platform is the Internet user. On the other hand, Xiaomi uses its own development or ecological chain method to connect it. Into the hardware and services.
Of course, the gap between Xiaomi and Apple is that Apple has formed an open platform with iOS operating system and App Store (application store), attracting many developers/companies to join. The deficiencies in the operating system are common shortcomings of all Chinese technology companies.
Supplementary information: According to the Xiaomi prospectus, its Internet services currently include two types of income: the first is the advertising service, and the second is the Internet value-added services (mainly games).
What does Xiaomi want to become?
"Who is Xiaomi, why did Xiaomi fight?" The latter half can actually be translated as "What Xiaomi wants to become." Lei Jun’s answer to this question also caused discussion.
He stressed that Xiaomi’s mission is to do “delicious, price-heavy,” good products, which is indeed the way Xiaomi wins.
But in the prospectus, Xiaomi made an extremely bold promise. The original version used the oath format:
”Our promise: Here, we promise to all existing and potential users that starting from 2018, Xiaomi's overall hardware business (including smart phones, IoT and consumer products) will not exceed 5 in comprehensive net profit annually. %. If there is more than one part, we will give back to the user. “
According to Xiaomi's prospectus, the gross profit margin of smart phones in 2017 was 8.8%, and the gross profit margin of IoT and consumer products was 8.3%. Making a "comprehensive net profit rate of no more than 5%" of this commitment means that Xiaomi has responded very seriously to "What Xiaomi wants to become":
On the one hand, it sticks to its own heart and provides users with cost-effective high-tech hardware products.
On the other hand, it wants to become an internet company, gaining benefits from hardware.
This is precisely where the contradiction lies: For a Chinese national company like Xiaomi, we hope it can continue to provide high-quality products, but we hope it can continue to obtain more profits, hoping that it can continue from 2016 to 2017. Rapid growth: In 2016, its operating profit was 3.8 billion yuan; in 2017 it was 12.2 billion yuan.
5% may be an excessive commitment.
In fact, Xiaomi has created "magic, price-honored" outstanding products enough, and profitability should have been a company's key responsibilities and dreams.
In this regard, Ren Zhengfei, the founder of another national company, said in 2012 that he shared with Huawei's internal R&D staff:
"We cannot have narrow sense of pride. This sense of pride will kill us. Our goal is to make money, it is to take Shanggan Ling. ”
This article, published as the Internet Knowledge Economy column, was published in the Southern Metropolis Daily on May 7, 2018, and was reorganized according to the originals when the Internet was published.