Lei Jun defines Xiaomi as an Internet company with mobile phones, smart hardware and IoT platforms as its core.
The long-rumored rumors of Xiaomi's listing have finally come to an end, and Xiaomi has officially submitted a prospectus to the Hong Kong Stock Exchange. In the prospectus, Xiaomi Chairman Lei Jun wrote an open letter to investors.
In the letter, Lei Jun defined Xiaomi as an Internet company with mobile phones, smart hardware and IoT platforms as its core, whose development is mainly driven by innovation.
In terms of technology, he talked about Xiaomi's exploration of cutting-edge technologies such as mobile phone technology, screens and chips;
In terms of model, Xiaomi has created a triathlon business model of "hardware + new retail + Internet services", using hardware as an important user entrance rather than a major source of profit, and promises to always insist that the comprehensive net profit rate of hardware does not exceed 5%.
Through investment, Xiaomi has also built a three-layer product matrix of mobile phone accessories, smart hardware, and consumer products around the mobile phone business, building an "ecological chain" company cluster.
Lei Jun talked about another point of innovation: from the "Internet development model of user participation" to the efficient new retail innovation of Xiaomi's online and offline integration. What makes him proud is that Xiaomi is a rare high-tech company with a "fan culture". Fan culture breeds word of mouth, which forms the cornerstone of the Xiaomi model.
In the open letter, Lei Jun said that the submission of the prospectus was an important historical node of Xiaomi. He said that Xiaomi wants to establish a global open ecosystem. At present, the Xiaomi model has proven to be universal and can be quickly replicated in many countries around the world. "The global business ecology established by Xiaomi has great imaginative prospects."
At present, Xiaomi is the fourth largest smartphone manufacturer in the world, and has created many smart hardware products, with the number one sales in many categories. Xiaomi's consumer IoT platform has connected more than 100 million smart devices; at the same time, Xiaomi MIUI has 190 million monthly active users.
The following is the original text of Lei Jun's open letter:
Hello! Thank you for your attention and support to Xiaomi. When you open this document, what you see is not just a thriving and progressive company, but a new business blueprint supported by courage and trust.
Here, I want to explain to you who Xiaomi is and why Xiaomi is fighting.
Xiaomi is not a pure hardware company, but an innovation-driven Internet company
Specifically, Xiaomi is an Internet company with mobile phones, smart hardware and IoT platforms as its core . Our mission is to always insist on making good products with "moving people's hearts and honest prices", so that everyone in the world can enjoy the beautiful life brought by technology.
Every day in the past 8 years, the vision of "making friends with users and being the coolest company in the hearts of users" has driven us to innovate hard, pursue the ultimate products and efficiency, and achieve Xiaomi, which continues to create miracles of growth.
When we founded Xiaomi in April 2010, my partners and I had a simple idea: to make a smartphone that we like and feel cool enough. Of our 8 co-founders, 6 are engineers, and the other 2 are designers, all of whom are avid "enthusiasts" of consumer electronics devices.
The eight words "moving people's hearts and kind prices" are inseparable and inseparable wholes. They are the ultimate products that far exceed the expectations of users, and they can also achieve "kind-hearted prices" in order to truly "touch people's hearts". Innovative technology and top-notch design are the pursuits in Xiaomi's DNA. Our engineers are obsessed with exploring technologies and products that have never been tried before. expected. We believe that the courage to break the stereotype and the belief of excellence are the keys to winning the appreciation and support of users.
More than technology, we promote a culture of bold innovation. From the frontier exploration of mobile phone technology, screen and chip technology, to more than 200 global design awards won over the years; from the "triathlon" business model to the company cluster through the "ecological chain"; from the "user-involved Internet development" Model", to the efficient new retail innovation spirit of Xiaomi's online and offline integration, which has flourished in Xiaomi and penetrated into every corner, driving us to continue to accelerate the pace of exploration.
Currently, we are the fourth largest smartphone manufacturer in the world and have created many smart hardware products, many of which are number one in sales. We have also built the world's largest consumer IoT platform, connecting more than 100 million smart devices. At the same time, we also have 190 million MIUI monthly active users and provide them with a series of innovative Internet services.
What really makes us more proud is not these numbers, but the face of a series of industries in China, such as smartphones and smart devices, has been completely changed because of our appearance.
We have promoted the rapid popularization and quality improvement of smartphones in China, which has laid a solid foundation for the rapid explosion of China's mobile Internet. Mobile payment, e-commerce, social networking, short video and other industries thrive in China thanks to the influx of hundreds of millions of people over the mobile internet. In China, the world's largest market, behind the leapfrog development and maturity of the mobile Internet industry, we are also recognized for making a lot of contributions.
Excellent companies make profits, and excellent companies win people's hearts. What makes us more proud is that we are a rare high-tech company with a "fan culture". The enthusiastic users known as "Rice Fans" are not only worldwide in large numbers, but also very loyal to our brand and actively participate in the development and improvement of our products.
Reborn from ashes, Xiaomi's business model has been fully verified
As a young Internet company, Xiaomi's development has not been smooth. In 2016, our market share has declined. We are soberly aware that there are still many foundations behind the rapid development in the past few years, so we take the initiative to slow down and make up lessons. In 2017, Xiaomi successfully completed the three major supplementary tasks of "innovation + quality + delivery", and quickly returned to the forefront of the world.
As far as we know, apart from Xiaomi, there is no mobile phone company that can successfully reverse the decline in sales.
Reborn from ashes, Xiaomi has gone through the training necessary for a long-term and stable company. Our management is more orderly, our talent pool is more substantial, our technology accumulation is deeper, and our supply chain capabilities and capacity management capabilities are stronger.
More importantly, our business model has been tested and fully validated.
Xiaomi is not a pure hardware company, but an innovation-driven Internet company. Although hardware is an important user entry point for us, we do not expect it to be a major source of our profit. We price well-designed products with outstanding performance and quality close to the hardware cost, deliver them directly to users through our own or direct supply of efficient online and offline new retail channels, and then continue to provide users with rich Internet services.
This is our original "Triathlon" business model: hardware + new retail + Internet service . Xiaomi's achievements so far illustrate the strong vitality of this model. In just 7 years since we started our business, our annual revenue has exceeded 100 billion RMB, a growth rate that many traditional companies cannot match.
The improvement in efficiency comes from a significant reduction in operating costs, especially transaction costs when delivering products to users. Xiaomi's unique business model enables the realization of good and cheap products, creating the foundation of user trust.
Always insist that the comprehensive net profit margin of hardware should not exceed 5%. At the beginning of Xiaomi’s establishment, we had a grand ideal: to change the generally low efficiency in the business world.
A shirt that costs $15 can sell for $150 in a Chinese store, an astonishing 10 times the fixed rate. A pair of shoes should be increased by 5 to 10 times, and a tie should be increased by more than 20 times. There are countless examples of this.
But it is always difficult for me to understand why the efficiency of production and circulation cannot be improved for a long time? Why do users have to pay for the huge losses in the intermediate links of business operations? Why do all the "cost down" efforts only focus on the 10% of the production cost, and never pay for the 90% of the operation and transaction costs that are wasteful?
Xiaomi has the courage and determination to drive a profound revolution in business efficiency. At the beginning of 2011, when Xiaomi had its first annual meeting, I told the more than 100 employees and their families present in the company that we wanted to make a smartphone with the best performance and experience for only $300— At the time, mainstream smartphones generally sold for more than $600.
Great companies make good things cheaper and better, and devote every energy to making products well, so that every penny paid by users is worth it.
Users are at the heart of all our business operations. On the way forward for Xiaomi, we have been thinking: From ancient times to the present, the business world has changed a lot, and beyond the topic of various business models, what remains the same?
Users' expectations for products that are "moving and price-friendly" are Xiaomi's answer.
Many of our users say that they can safely "buy with their eyes closed" when they enter Xiaomi Home or log in to Xiaomi Mall, because the quality and price must be the best. This is our greatest affirmation and our ultimate pursuit.
Without the trust of users, there will be no efficiency we pursue. User trust is the cornerstone of the Xiaomi model. Efficiency is the soul of the Xiaomi model. Continue to win the trust of our users, and any business of ours will be successful. And a company that truly achieves world-class efficiency will have the ability to ride through the economic cycle, continue to seize new opportunities emerging in the industry, and maintain excellent operating performance for a long time.
"Moving people's hearts, kind prices" is not an empty phrase, these eight words are our values and spiritual creeds. Here, I would like to promise all existing and potential users: From 2018, the comprehensive net profit margin of Xiaomi's overall hardware business will not exceed 5%. If there is any excess, we will give back to the user.
Because we always firmly believe that the pursuit of product experience is more promising than the pursuit of one-time hardware sales profits; compared with the increase in channel prices, the genuine materials and the kind pricing are more popular.
We have always believed that our belief that mass consumer goods should actively control reasonable profits will become an irresistible trend of the times, and any move that is greedy for high margins will lead to a point of no return.
Therefore, I would like to explain to you that we will pay more attention to the maintenance of long-term user value, and the commercial value of Xiaomi and your investment value will also come from and only from the continuous enlargement of user value.
The comprehensive net profit margin of hardware never exceeds 5% is the proof of Xiaomi's efficiency. We are well aware that it will take time for Xiaomi's philosophy to eventually become the consensus of the society, but time will be Xiaomi's friend. Our stubborn persistence, continuous investment, and resolute implementation will eventually lead to the realization of the ideal.
To build a global and open ecology, our journey is a sea of stars
Today, Xiaomi has reached a historically important node. Facing the future, the global business ecosystem established by Xiaomi has great imaginative prospects.
What Xiaomi wants to build is by no means a closed business empire. Xiaomi is not only an innovative technology company, but also the founder and promoter of lifestyle in the digital age. To enable everyone in the world to enjoy the beautiful life brought by technology, to achieve this goal, one Xiaomi is far from enough, and 100 or more "Xiaomi" are needed to build a rich and prosperous new business ecosystem together.
"Virtue is not alone, there must be neighbors", through the unique "ecological chain model", Xiaomi has invested and led more like-minded entrepreneurs to build a three-layer product matrix of mobile phone accessories, smart hardware, and consumer products around the mobile phone business. Now, Xiaomi has invested in more than 90 ecological chain enterprises, changing hundreds of industries, and this number will be even larger in the future.
Such changes are not only happening in China. Taking the smartphone business as an example, among the markets in more than 70 countries and regions that we have entered in the world, we have achieved the first share in India and the top in 15 countries. We are and will continue to prove that the Xiaomi model is universally replicable across the world.
The establishment of a global open ecosystem will give Xiaomi more opportunities for long-term development, broader boundaries and a more stable foundation. The era of big data and artificial intelligence is just around the corner. We believe that the large amount of unique data generated by our global ecological platform will enable us to gain a more keen and accurate insight into the needs of users, which will give us a huge advantage in the future.
Xiaomi is a company dominated by an engineer culture. The dream of engineers is to continuously explore advanced technologies and benefit as many users as possible. It is our vision to be the coolest company in the hearts of users. We firmly believe that the benefits brought by technological innovation and progress should be easily shared by the public. The essence of the Internet spirit is transparency, efficiency, and equality and inclusiveness.
The greatest equality is the equality of daily life experience: let everyone, no matter what skin color, what religion, where they come from, or what education they have received, can enjoy the beautiful life brought about by technology with the same ease.
This is the goal that all Xiaomi employees and I have been striving for day and night.
Thank you for your attention to Xiaomi, and for joining us in the magnificent cause of creating a new paradigm of business efficiency and improving human life with technology. Xu business is honest, Xu technology is warm, Xu public is happy, our journey is a sea of stars, and we have just taken the first step. We have changed the lives of hundreds of millions of people, and in the future we will become billions of people around the world. part of life.
Kind people will not have bad luck. Please join us in always believing that good things are about to happen.
Lei Jun
Don't forget the original intention, Fang De is always. Why am I not a rice noodle? work hard together