In terms of Red Riceís hardware, its MediaTek MT6589 chipset accounts for 20% of the total manufacturing cost. The 4.7-inch, 312 ppi IPS display by AUO, a significant upgrade from the 220 ppi display commonly used in similarly priced devices, represents 22% of the cost. Based on its component cost, Red Riceís total manufacturing cost is estimated at
TrendForce believes that Red Riceís low price is possible because of Xiaomiís successful cost control. First, Xiaomi usually unveils new products at least a quarter before the actual launch, which gives time for the component cost to decrease. Second, Xiaomi controls inventory better than its competitors. Using an Internet-based pre-order sales model, Xiaomi is able to accurately estimate its initial production, thereby reducing the risk from worse-than-expected sales. Third, by marketing via social networks, Xiaomi cuts down on advertising costs while being able to cause a stir on the market with each new device launch.
TrendForce believes Xiaomiís long-term strategy includes continued expansion in the domestic market as well as entering foreign markets with high price-performance ratio devices. As social network platform services and software are the companyís main sources of profit, Xiaomi will need to develop new strategies to attract consumers in foreign markets. As the companyís recently closed funding round has skyrocketed its valuation, Xiaomi is financially set to expand in foreign markets, potentially by acquiring local businesses. The funds could be otherwise used to improve manufacturing and avoid untimely product delivery, a notable weakness of the growing company.
For more details, please visit: http://press.trendforce.com/en/node/5959
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