Xiaomi limits net profit margin goals, pledges to distribute excess to customers

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Xiaomi’s business is producing low-margin consumer electronics from smartphones to laptops to smart bikes and smart home appliances. While that mission may not always remain the same, CEO Lei Jun has just announced an incentive to keep it that way for as long as the company survives.

The company is now pledging to “forever” limit net profit margins after tax to 5 percent and that it would return any excess to customers “by reasonable means.”

As TechCrunch points out, though, selling consumer items in and of themselves does not generate great profits (unless you’re Apple). Samsung, LG and other outfits take advantage of other divisions like in durable goods and components pads out the margins a bit and while Xiaomi has a burgeoning in-house chipmaking operation, it’s not known how far it will progress beyond providing silicon for the company’s own phones.

This new mission puts Xiaomi squarely against investors as it comes up for an initial public offering — Chinese media say that shares may be listed in Hong Kong and a mainland bourse, potentially limiting shareholder demands for profit padding, but there’s certainly a narrower range for balance that the company can achieve from this point.

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About The Author
Jules Wang
Jules Wang is News Editor for Pocketnow and one of the hosts of the Pocketnow Weekly Podcast. He came onto the team in 2014 as an intern editing and producing videos and the podcast while he was studying journalism at Emerson College. He graduated the year after and entered into his current position at Pocketnow, full-time.