In the past few years, Chinese electronics giant Xiaomi has made its name selling phones that sharply undercut the likes of Samsung and Apple on price.
On Thursday, Xiaomi filed to list on Hong Kong’s stock exchange, in a much-talked about initial public offering (IPO).
According to the South China Morning Post, Xiaomi is looking to raise $10 billion in the largest IPO by a Chinese tech company in four years.
Back in 2014, Chinese e-commerce firm Alibaba broke records when it went public on the NYSE, raising $25 billion in what is to date the largest global IPO ever.
The third-largest phone maker in China and the fourth-largest worldwide, Xiaomi’s filing is also a boon for Hong Kong’s stock exchange, which recently loosened its rules to try and attract more companies to list there.
Pile it high and sell it cheap
In an open letter, Xiaomi CEO and founder Lei Jun reiterated an “ultimate commitment” to cap its profit margins to 5 percent on its hardware, including smartphones and other devices.
Jun also pledged to return any excess cost above 5 percent to its users, somehow, even though its phones sell for much less than competitors with similar specifications.
“We know that it may take time for everyone to fully embrace our ideals. However, time is on our side. Our steadfast determination and execution will eventually help us to realize our dreams,” Jun said.
Xiaomi also indicates it is looking to make money from internet services, which includes advertising, games and music/video streaming services like Mi Music and Mi Video — which the company launched in India on Wednesday.
The electronics maker decision to list comes off the back of rapid growth for the company. In 2017, it recorded $18 billion (114 billion yuan) in revenue — a 67 percent increase in sales compared to the year before.
But it did lose $6.8 billion (43.9 billion yuan) that year, mainly from issuing preferred shares to investors.
Yet to crack the U.S. market
While Xiaomi is present in 74 countries and regions, it is yet to crack the U.S. smartphone market, something that it intends to do this year.
“The U.S. market is very important to us but we are very, very carefully building our resources to serve the U.S. consumer,” Xiaomi’s head of international business, Wang Xiang, told CNBC in February.
Chinese smartphone makers, notably Huawei and ZTE, have found themselves under increased scrutiny by U.S. agencies like the CIA and FBI. Authorities are suspicious these phones could be used for espionage, and Xiaomi might need to navigate these concerns as well.
You can already buy Xiaomi’s non-smartphone products in the U.S., however. Xiaomi’s electric scooter and portable charger, the Mi Power Bank Pro, are available at Amazon, while its Mi Box for TVs are sold at Walmart.