Xiaomi, Not Apple

To sell high-quality cell phones at so low a price, Xiaomi keeps each model on the market far longer than Apple does. On average, a new version of a phone is launched every 265 days in the industry – down from 345 days in 2009. But Xiaomi doesn’t renew its product for two years. Then, rather than charge high prices to cover the high cost of state-of-the-art components, Xiaomi prices the phone just a little higher than the total cost of all its components. As component costs drop over the two-year period by more than 90%, Xiaomi maintains its original price, and pockets the difference. So essentially its profit formula is the opposite of Apple’s, which collects its highest profits with the introduction of each model and needs to come up with new model after new model to keep those margins up.

Xiaomi, Not Apple, Is Changing the Smartphone Industry – Harvard Business Review.

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