It's an interesting ambition at least, for Chinese mainland firm Xiaomi to try and beat both Google and Apple at the smartphone manufacturing game. They're doing it for the moment in China too: the question is whether they'll be able to make that work in other parts of the world.
The established smartphone vendors should prepare for challenge from China: Xiaomi, a firm started just three years ago by a Chinese serial entrepreneur and Google's ex-head of engineering, has announced plans to move out of the Middle Kingdom and onto the world stage. ... Lei said that in the first half of the year Xiaomi has more than doubled 2012's revenues, bringing in 13.2 billion yuan ($2.16bn) by this June and set to reach 28 billion yuan ($4.6bn) for the full year. The company is profitable, Lei said, although declined to put a figure on the amount, and is valued at around $10bn by venture capitalists.
The aim is to sell the hardware at around and about build and marketing costs. Then to make a profit by providing software and services beyond that. It's a plan that seem to be working inside China too so it may well work outside the country.
After all, who wouldn't want leading edge technology for cheaper?
The problem for the other companies in the space, Samsung, Apple and Google (through Motorola Mobility) is that they're all trying to make profits on the hardware itself. Which is fine of course, the idea of making a profit is a good one. But manufacturing costs are pretty much the same for everyone. All four of the companies will be paying roughly the same amounts for the screen, battery, processor, RAM and so on. There might be minor differences in the assembly cost but that's trivial as a percentage of retail price.
Which means that the price difference between a similarly specced smartphone is really just that manufacturing profit that someone's trying to make. And that's something that is vulnerable to someone deliberately trying not to make a profit on the handset itself. Apple's very fat margins are vulnerable to someone doing exactly what Xiaomi is attempting.