Net profit margin in hardware biz will never exceed 5%: Xiaomi

Xiaomi founder and CEO Lei Jun today said the company will keep its net profit margin at under five per cent to earn the "long-term support" of its customers.

"If we sell our products at close to cost and return value to our users, then we can earn the long-term support of our users," Jun said in a letter to employees.

He added that large volumes with small profit margins will still result in "suitable hardware profits" for the company in the long term. Jun said the company's "triathlon business model -- involving hardware, internet service and new retail -- had helped sell products as close as possible to their cost price.

At present, the company has over RMB 100 billion in annual revenue and has nearly 20,000 employees.

Xiaomi entered the Indian market in 2014 and has gradually secured the top spot in the market. While it started as an online only player, it has expanded its presence in offline retail through Mi Preferred Partners.

The company has also invested in setting up local manufacturing across various locations in the country with partners like Foxconn and Hipad.

According to Canalys, Xiaomi increased its lead on Samsung in India, grabbing 31 per cent market share and the top spot with shipment of over 9 million units. The Korean company, it said, had shipped 7.5 million units in the first quarter of 2018, followed by Oppo and Vivo.

The overall smartphone market in India grew at 8 per cent to 29.5 million units in the said quarter. India is among the fastest growing smartphone markets globally.