Just before the official launch of the listing, Lei Jun proposed a so-called 5% strategy at the Wuhan University's press conference: The comprehensive post-tax profit margin of Xiaomi's hardware business will not exceed 5%, which caused a wide range of discussions. it is also considered one of the important goals after millet IPO: become a promoter of network services, rather than selling hardware profits in other words, millet (LEI) strategic territory, only to provide hardware and software services. Existence, but the software service is the profit indicator of Xiaomi. Some commentators think that the ambition behind this matter is enough to prop up Xiaomi's valuation.
But don’t ignore the fact that Xiaomi’s mobile phone was actually doing this from the very beginning of the launch. They started the Xiaomi app store and developed the MIUI operating system through the Android system. They believe that the software application will be the next golden chicken in the ecosystem. . to view the results, MIUI did not become iOS, after the Android, enough to hold up one day mobile operating system; and even millet application store has become the fourth largest Chinese mobile terminal sales application platform, but still did not get the expected millet Revenue effect.
7 years later, Xiaomi is still working hard. In 2018, the research organization TrendForce is expected to become the world’s fourth-largest mobile phone sales company. In return, it’s in return for a loss of RMB 41.83 billion in 2017, and mobile phone sales accounted for the same year. Revenue of 70.3%, IoT and consumer products accounted for 20.5% of revenue, Internet service revenue accounted for only 8.6%.
The idea of relying on web services to create an ecosystem, supplemented by software-based hardware, is fundamentally different from the strategies and practices of the two major mobile phone makers Samsung, Apple and Huawei.
The three major mobile phone makers' ecosystem thinking and Xiaomi Xiang left
The advantage of Samsung is mainly from one-stop service of overall hardware production. Although Samsung’s mobile phone sales are the largest in the world as a whole, Samsung’s own technological advantage in the component market has contributed to Samsung’s profit, while mobile phones are Samsung's powerful manufacturing technology demonstration works, although Samsung's software tuning is also very good in Android phones, but Samsung's profit in the 'software services' is hardly worth mentioning.
The profit rate of Apple's mobile phones has always exceeded 35%, and it is also the most important source of income for Apple. In the first quarter of 2018, although the sales volume of iPhone X is not as explosive as before, the pricing of 1,000 US dollars still makes Apple appear. With record revenues and profits, Apple’s strong advantage lies in the ecosystem of Apple’s operating system. Apple’s products are connected in series, but so far Apple’s most lucrative profits have come from hardware sales, even in 2018. Quarterly financial reports, all Apple-related service revenues accounted for only 10% of the overall, is definitely not a bright spot for revenue, but these services allow users to love Apple's products.
Not to mention Huawei, as the world’s largest telecom equipment vendor, Huawei’s mobile phone is considered to be a key income for Huawei’s growth in revenue, except for the US that will never make it into the network. It is the most important edge computing product when the edge computing is developed in the future. For telecom equipment suppliers like Huawei, the mobile phone is an important product that enables them to increase the advantages of revenue and telecom equipment. Therefore, the ecosystem of Huawei is mainly from In the telecommunications equipment, network, mobile phone in one of the three, in order to allow products to enhance each other, thereby increasing revenue.
As mentioned earlier, Xiaomi’s strategy is totally different from that of the top three mobile phone makers. Perhaps in the imagination of Lei Jun and Xiaomi’s board of directors, the hardware exists only to support software, so no consideration has been given to receiving money from the hardware. The key lies in this Supported services. On the eve of Xiaomi’s public fund-raising application on May 3, Xiaomi took the music streaming and audio-visual services in the Indian market, where they had grabbed the first place. This may also be clearly seen. Millet's goal: Cheap mobile phones, coupled with high-visibility software services, India is a market that millet must grab.
But this points to a very interesting question: If you just want to sell software services, why do you need to sell hardware?
Software service competition has become a situation of the Red Sea
Mobile phones are not game consoles. Now the world’s top two operating systems, iOS and Android, have eaten most of the market for smart phones, which means that even if the phone models are different, basically if you want to add various types of services to the above It's not difficult. Unlike game consoles that use different operating systems and specifications, the exclusivity is extremely serious. Therefore, the strategic considerations of the game consoles are mainly dominated by 'solely big'. As long as you get several important games, you can successfully improve the game. Machine sales.
However, mobile phones do not need to use hardware to enhance the user's thinking. After all, in the strong competition between iOS and Android, they basically open their hands and let all kinds of services enter their own systems, thereby enhancing the user's adhesiveness. Compared to game consoles, the exclusivity of mobile phones in software is not so serious. Obviously, the reason why Samsung, Apple, and Huawei did not focus on software is because they are very clear about the trend of software services. The development of software and services into the mobile phone Red Sea period, no matter in which areas of software services are all bloody rivers.
Apart from the fact that hardware companies are more likely to raise funds than pure software service companies, it is hard to think of why Xiaomi would need to “sell hardware” to achieve the goal of software sales. Of course, Xiaomi would still use millet bracelets, cleaners, etc. Other hardware collects information in order to achieve the vision of building an IoT ecosystem with Xiaomi's mobile phones. However, such a vision requires the IoT system to achieve a level of 'toll or even a major profit', and at least 3 to 5 years of experience (this figure may still be Underestimated), and whether the funds raised after the listing of Xiaomi will enable them to continue to achieve such a goal?
Assuming Xiaomi's goal is to provide music and audio and video services, it means that they must compete with streaming media services that are already on the market today. However, the biggest problem with streaming media services is that copyright is in the hands of others (whether it is audio and video. Or music is the same), to collect enough streaming media service content, the premium to pay is not a small sum. Just to see the fight between Netflix and Disney can know, such a big company as Disney is determined to When you are doing your own streaming media service, it is very likely that you will no longer provide content for other streaming media services, and Netflix will have to devote more resources to creating its own content in order to prevent users from loosing. This is simply a very costly expenditure. , together with other competition from existing streaming media services, has caused monthly fee pricing to be difficult to increase. This is also an important reason for the profitability and user maintenance of streaming media services. If Xiaomi can sell 300 million mobile phones a year, he How many users are willing to pay for online services?
These reasons are also the potential crisis of Xiaomi’s plan to use “network services” as its main revenue. If Xiaomi’s listing is to allow investors to continue to invest in Xiaomi, Lei Jun must be able to tell different stories and development directions like Bezos. , Make the company not oriented toward profit, but investors are still willing to bet on him. Maybe millet's chances of success will be bigger.