Chinese electronics giant Xiaomi dubbed Indonesia as one of its most important markets, in addition to China and India

Lei Jun, CEO and Co-Founder of Chinese electronics company Xiaomi, today announced that the company is going to set up a permanent business entity in Indonesia during a sharing session with media, fans, and business partners in South Jakarta.

The announcement followed the opening of the smartphone brand‘s third store in Bekasi, West Java, on Tuesday. Its other two stores are located in Jakarta and Tangerang.

“This is the first time I have ever been to Indonesia, and Indonesia has become a main destination for Xiaomi. In addition to China and India, Indonesia is our most important market,” Lei said.

“We are expecting to become a local company in Indonesia, and we are hoping for support from all of you,” he added.

However, Lei did not share the exact timeline for the setting up of the local business entity.

The plan is in line with the Indonesian government’s recent push for foreign tech companies to set up a local business entity to ensure tax compliance.

Another regulation also obliged smartphone manufacturers to implement 30 per cent of local components in its products. Xiaomi had complied to this regulation by manufacturing its smartphone in Batam, starting in February.

With its smartphone products available in 60 countries worldwide, Xiaomi claimed that it is currently in the top five position in 12 global smartphone markets.

In Indonesia itself, the smartphone brand is said to be among the top three brands.

Xiaomi is set to launch more of its products for the Indonesian market, with smart sunglasses and umbrella being two of them.

Also Read: Xiaomi’s former global evangelist Hugo Barra joins Facebook

The Xiaomi way

 

Xiaomi started out in 2010 with only seven to eight people in its team and US$5 million in capital.

Apart from being a smartphone maker, Xiaomi is also builds an ecosystem of smart electronic goods with products ranging from robot vacuum cleaner, rice cooker, washing machine, scooter, toys, to even desk lamps.

Lei described the company’s business model as a combination between hardware, internet platform, and new retail.

Dubbing the business model as the “golden triangle,” he explained that the development of Xiaomi’s various hardware products was primarily driven with the need to offer a great variety of products in its offline stores.

It currently owns “more than” a hundred of subsidiaries in hardware manufacturing, and had invested US$500 million for the companies.

In 2016, Xiaomi recorded US$15 billion revenue from its ecosystem of smart hardware products.

Lei attributed the company’s financial success to its pricing strategy.

There are at least five elements that determine the price of a product, from raw material and production cost, research and development shared cost, marketing and advertising, sales and distribution channels, to profit margin.

At the early days of its operations, Xiaomi allocated almost zero for marketing and advertising costs.

It also allocated more to raw material and production cost, as well as research and development.

“We cut off the profit margin part; we take zero profit from hardware,” Lei said.

Xiaomi also tries to ensure that the price of products sold in its offline stores is equal to its online store.

“Basically, we are more like the Muji of the tech world,” he said, referring to the popular Japanese fashion and lifestyle brand.

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