Xiaomi CEO Lei Jun About Xiaomi`s Goals in 2017

Dear Xiaomi colleagues,

Happy New Year!

2016 was an exceptional and memorable year for Xiaomi. In so many ways, 2016 was an amazing year in Xiaomi’s short history.

2016 was a year in which we took the time to catch our breaths and slow our rapid pace to make essential adjustments to our business that will enable us to go further. Despite this, we still managed to achieve remarkable results in six key areas:

We explored new frontiers in technology and created a breakthrough in the high-end smartphone market.

Xiaomi is a company driven by an engineering culture, and the pursuit of technological breakthroughs is a key part of our DNA. In 2016, we achieved a series of such breakthroughs on our smartphones: Mi 5 was the first in the world to feature 4-axis OIS and 3D ceramic body; Mi 5s was the first in the world to incorporate an ultrasonic fingerprint sensor and the first in China with an incredibly light-sensitive camera featuring a pixel size of 1.55um; Mi Note 2 was one of the first handsets in the world to use dual curved glass and Mi MIX was the first in the world with a full display design, a true showcase of our technological innovation and design capabilities. In the process, we have applied for over 16,000 patents around the world, and we have already been granted 3,612 of them, of which 1,767 are granted by overseas patent agencies. Only by constant innovation will we be able to introduce breakthrough products in the intensely competitive high-end smartphone market.

We saw great results from our new retail strategy.

Solidifying our lead in China’s e-commerce industry, we were crowned #1 in sales for the fourth November 11 Singles’ Day in a row. We have also upgraded our Mi Home outlets into full-fledged retail stores. To date, we have opened a total of 54 Mi Home stores, three of which (one each in Shanghai, Beijing and Zhengzhou) have surpassed RMB 100 million in GMV this year. We aim to open 200 more Mi Home stores in 2017 and open a total of 1,000 stores over the next three years.

We experienced rapid growth in our global operations.

Xiaomi India reached three major milestones in 2016: in October we sold 1.35 million smartphones; we passed US$1 billion in annual revenue for the first time, and we secured a spot among the top 3 smartphone players in India.

We saw superb results from our Mi Ecosystem business.

Total revenue from our Mi Ecosystem products, smart TVs, and smart routers crossed RMB 15 billion in 2016, and we have over 50 million connected devices on our Mi Ecosystem IoT platform. At the same time, we have also become the world’s most successful hardware incubator.

We now have proof of the success of our Internet services business model.

In 2016, revenue from our Internet services doubled, proving without a doubt that Xiaomi’s business model works.

We end the year with greatly improved management and higher organizational efficiency.

We end the year with greatly improved management and higher organizational efficiency. As an example, since we reorganized our smartphone hardware team in May 2016, the team has doubled, and we have strengthened product R&D, supply chain, and quality management. At the same time, we are also strengthening information flow at the management level, and improving management overall.

In short, despite the challenges we faced in 2016, we still delivered excellent results. A big thank you to all Xiaomi employees for your hard work!

Difficult times are behind us.

Our accomplishments are impressive, but the challenges we faced were unforgettable. In the first few years, we pushed ahead too fast. We created a miracle, but also drew on some long-term growth. So we have to slow down, further improve in some areas, and ensure sustainable growth for a long-term future.

Our e-commerce strategy has also faced some challenges. E-commerce now makes up just over 10% of overall retail in China, and the online smartphone market only makes up 20% of the overall smartphone market. Xiaomi has great ambitions, and we are not satisfied with just being an e-commerce smartphone brand, so we have to upgrade our retail model, and incorporate offline retail for a new retail strategy.

At the same time, we suffered from supply issues for four months in 2016. The smartphone supply chain is extremely complex, and the efforts we made over the past few years have not been enough to shield us from the impact of last year’s challenges. However, the worst is over. With innovative technologies and products that speak for themselves, the year ahead already looks extremely promising.

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Five core focus areas and one humble goal

So what will Xiaomi do in 2017? We have identified five core focus areas: technological breakthroughs, new retail strategy, globalization, artificial intelligence and Internet finance. In 2016, we made major strides forward in the first three areas and achieved outstanding results, so I will focus on the latter two areas.

Last year, AlphaGo easily defeated Lee Sedol, stunning the world and demonstrating the potential of artificial intelligence to change human lives. We also have exciting developments in AI. Last year, our face detection algorithm topped the charts in the University of Massachusetts’ FDBB (Face Detection Data Set and Benchmark) studies. AI will help us make people’s lives easier, and this is our mission.

Internet finance is another key area that we will focus on this year. In December 2016, we launched XW Bank in a joint venture with partners including New Hope Group and the Hongqi Chain. We have a team of over three hundred people working on laying the foundation in the financial sector for loans, insurance, securities, finance, and payments, as well as securing the necessary licenses. This is extremely important for our future. Commercial giants of the future will not only be Internet companies but also finance companies, because the future of finance lies in AI and big data. We are still a startup company, but we have great ambitions and capabilities too.

Finally, in 2017, we have a humble goal of RMB 100 billion in revenue for the year.

Values are the most important

Sincerity and passion are Xiaomi’s core values. Sincerity means making sure our products are of very high quality with accessible pricing, all while making friends with our customers and listening to their requests. Passion means gathering a group of people who pursue excellence in creating products and who come together to experience the joy of entrepreneurship.

This is the core of Xiaomi. If we are not sincere and reliable, users will see through us; and if we are not passionate, we will neither be able to bear the challenges we face on this path nor make products that touch people’s hearts.

Our vision is “innovation for everyone” and if we don’t enjoy this process, how can we get our users to enjoy the innovations we are bringing to them? Indeed, our sincerity and passion have already changed many people’s lives.

Looking back over the past seven years, we have disrupted the smartphone industry and other product categories, lifting the quality of products across the board.

Since the day we started, we had a dream of becoming a great company. Rather than pursuing profit, I believe that there is a better future for us when we focus on product experience. Rather than many layers of distribution channels that add to the cost of products, I believe that high-quality products at accessible prices will win more people’s hearts. It is a challenging road ahead, and we must overcome the difficulties as we work towards our dream.

A big thank you to all at Xiaomi, who have contributed in one way or another to the company. Years later, you will be able to proudly say that you played a key role in creating a great tech company to bring the joy of innovation to billions of people around the world.

Lei Jun

1/12/2017