Xiaomi Corporation XIACY
January 04, 2021 - 11:21pm EST by
2021 2022
Price: 4.49 EPS 0 0
Shares Out. (in M): 25,166 P/E 0 0
Market Cap (in $M): 114,411 P/FCF 0 0
Net Debt (in $M): -7,452 EBIT 0 0
TEV (in $M): 107,374 TEV/EBIT 0 0

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Founded in 2010, Xiaomi is a Chinese technology company with headquarters in both Wuhan and Beijing. The company’s first product was a custom ROM Android operating system, called MIUI, launched in 2010, followed up by Xiaomi’s first smartphone in 2011, the Mi 1, which was priced at cost (1,999 yuan) and sold 7.9mm units after initial forecasts for 300k units in sales. 


Today, the company sells smartphones, internet services (primarily advertising), and IoT/Lifestyle products (wireless earbuds, bluetooth speakers, e-scooters, high-end televisions, TV sticks/boxes, smartwatches, air purifiers, robot vacuums, security cameras, etc.). The most recent Xiaomi phones come loaded with MIUI 12, built on top of Android 11 (MIUI 13 expected sometime in 2021), and Mi Apps that include Mi Browser and Mi Music.


In Q3 2020, Xiaomi’s Total Revenue was up 34.5% YoY to 72.2B RMB and adjusted net profit was up 18.9% YoY to 4.1B RMB. Q3 2020 adjusted operating cash flow was 9.5B RMB. The company has an awesome growth trajectory.


According to Xiaomi’s CEO, Jun Lei, “Our dream has always been to make the world’s best phones half the price, so everyone can afford them.” In Q3, Xiaomi shipped 46.5mm units, good for 13.1% share of the global smartphone market and 42.0% YoY growth. This puts their global market share 3rd behind #1 Samsung’s 80.4mm units (22.7%), #2 Huawei’s 51.9mm units (14.7%), and ahead of Apple’s 4th ranked 41.6mm units (11.8%).


Xiaomi is ranked #1 in smartphone market share in 10 markets, including Spain, Ukraine, Poland, Greece, India, and Turkey. They are ranked #2 in Italy, Russia, Colombia, Egypt and many other countries. In total, their smartphone market share is ranked in the top 5 in 54 markets. They have yet to break into the U.S. market, but are ranked 4th in Mexico.


The company excels in engineering and design, with a founding team comprised of former engineering heads at Google and Motorola. The company, and highly popular CEO, Jun Lei, promote a culture of engineering and design excellence, similar to Google and Apple. Xiaomi also fosters an entrepreneurial environment and keeps a finger on the pulse of the 5G economy by incubating over 100 IoT device startups and investing in over 300 technology startups ranging from smart rice cookers to smart electric vehicles (including XPeng and iQIYI). The company likens itself to Apple and Amazon, but Xiaomi Ventures may be giving Google Ventures a run for its money.


As of Q3 2020, Xiaomi has 289.5mm IoT connected devices (up 35.8% YoY), 5.6mm users with 5 or more devices connected to Xiaomi’s AIot platform (up 59.0% YoY), and 78.4mm AI assistant MAU (up 35.5% YoY). 

Xiaomi sells its flagship line of Mi smartphones for ~5,000RMB and a mid-tier (but 5G enabled) RedMi phone for ~2,000RMB, as well as the gorgeous higher priced concept smartphone, Mi MIX. Xiaomi’s core phone lineup has competitive specs (and attractive designs) when compared to premium brands like Apple and Samsung but Xiaomi’s new models sell for 30-50% those premium brands’ prices. For instance Xiaomi’s Mi 10 Pro has a 108 Megapixel quad camera with 8K Ultra HD video, a Qualcomm Snapdragon 865 CPU, a 90Hz 6.67” DotDisplay with TrueColor, and a Dual speaker system for cinematic audio.

The company has very good insider ownership (read: shareholder alignment) with CEO Jun Lei holding 26.5% of shares outstanding and co-founder Lin Bin holding 9.3% of shares outstanding.

Xiaomi also has good alignment with the CCP in terms of their policy initiative to become technology self-sufficient. Xiaomi introduced their first in-house chipset, the Surge S1, in 2017. Xiaomi’s contractors were instructed to stop producing Huawei’s proprietary Kirin chips starting September 15, 2020; there will likely to be an announcement regarding Xiaomi’s in-house System-on-Chip (SOC) development in 2021.

Xiaomi’s highly popular CEO, Jun Lei, has pledged that the overall net profit margin of Xiaomi’s hardware business will never exceed 5%. This commitment will obviously limit the company’s go-forward net margins, but the move will offer continued support to Xiaomi’s market-beating performance/price offering and will help maintain Xiaomi’s extremely high levels of customer satisfaction. Xiaomi is a disruptive force in the global smartphone market.

Current market trends suggest that Xiaomi will be the #1 global smartphone company by shipments in 2-3 years. With Xiaomi’s high margin internet services business, fast growing AIoT/Lifestyle business, and only $101.8B equity value, it is likely that Xiaomi will trade multiple times higher sometime over the next five years as it is re-rated with its peers, Apple ($2.18T EV), Samsung ($417B EV), and Google ($1.08T EV)


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


  • Re-rating as a global technology major
  • Potential entrance into US market
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