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Xiaomi isn’t making money on hardware, but reaffirms, that shrinking smart phone sales won’t hit the company

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Chinese electronics upstart Xiaomi, has witnessed a sharp drop in its smart phone sales, but the company does not fear as it is of the view that they will derive its revenue from other products. On that note though, Xiaomi has agreed, that it isn’t making any money on its hardware sales.

The same was confirmed to Reuters by a senior executive. He however, reiterated that the drop in smartphone sales will not have a major impact on the company as profit growth will be driven by sales from smart home devices as well as revenue from its software eco-system.

In 2014, during its last fund raising, Xiaomi was valued at $46 billion, which made the company the world’s most valuable start-up. Ironically, at that time Xiaomi was China’s best-selling smart phone maker and was expected to grow worldwide seeing its growth statistics.

However, 2015 did not prove to be lucky for the Chinese company. Unfortunately, it missed its global smart phone targets by as much as 12 percent. In the third quarter of 2015, its smart phone sales fell by 45 percent, according to research firm IDC.

Xiaomi’s global vice-president, Hugo Barra said on the situation that the company’s business model was not based on money made from smart phone sales and the company did not need to raise more funds or see any point in doing so at a valuation of less than $46 billion.

In an interview with Reuters, he said, “Basically we’re giving [handsets] to you without making any money… we care about the recurring revenue streams over many years.

We could sell 10 billion smartphones and we wouldn’t make a single dime in profits,” he added.

Xiaomi, which has never been too keen on disclosing its profit and revenue figures, after witnessing a fall in its smart phone sales has emphasized that its range of home appliances such as air and water purifiers, and rice cookers as key earnings drivers.

In April, Xiaomi Vice President Liu De had said that the firm is expecting sales of smart home devices to double to 10 billion yuan ($1.5 billion) in 2016.

The company has invested a huge amount in India and Southeast Asia and is soon going to enter the U.S. market as well. It will be launching its first device capable of roaming on the country’s 4G networks next month.

Talking on launching in U.S., Barra said they are first targeting Chinese users traveling in the U.S., but are laying the groundwork for direct sales to U.S. consumers.

He also divulged that In January, Xiaomi will also make its debut at the Consumer Electronics Show in Las Vegas, launching a new product during the event.

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