After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

After crossing RMB 100B

revenue milestone, a new
journey for Xiaomi begins in
2018
This is Lei Jun‘s letter to all employees at our year-end gala, our most
important annual event.

Dear Xiaomi colleagues,

Happy New Year!

2017 has been an extraordinary year for Xiaomi. It was a “turnaround

year”, but more importantly a “leapfrog year” — a critical year in breaking
new ground for our future as we embark on a new journey.

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 1 of 8
After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

1. Crossing the RMB 100B revenue threshold

In October 2017, we exceeded the revenue goal of RMB 100 billion set at
the beginning of the year. I checked — and found out that to achieve this
milestone, Apple took 20 years, Facebook took 12 years, Google took nine
years, Alibaba took 17 years, Tencent took 17 years, Huawei took 21 years.

Xiaomi has taken only slightly over seven years. We are very likely to enter
the Fortune Global 500 list of companies this year.

2. Three reasons for the successful rebound in smartphone

sales

Due to the improvement of our turnover capabilities, our global shipments

have improved significantly since Q2 2017 — Xiaomi is back in the top 5
smartphone brands. As per IDC, we have become the world’s #4
smartphone brand in Q4 2017 in terms of shipments. Even with the overall
smartphone market declining 6.3%, we managed to maintain a year-on-
year growth of 96.9% — Xiaomi was the only brand with continuous
growth, demonstrating the support and recognition we received from our
users.

How did Xiaomi achieve this turnaround? This is because we use a

telescope to look at innovation, and a microscope to examine product
quality. Innovation determines how high we can fly, while product quality
determines how far we can go.

1) Relentless pursuit of technology innovations, release of Surge S1 and

leading the smartphone industry with Mi MIX 2

Xiaomi is driven by an engineering culture and innovation is in our DNA.

In 2017 we grew from focusing our innovations on single products to a
more systematic approach.

Early last year, Xiaomi launched our first chipset Surge S1 and successfully

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 2 of 8
After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

put it into mass production. We became the fourth company in the world
with the ability to design and manufacture both chipsets and smartphones.

In Q3 last year, we launched Mi MIX 2, becoming a leader in the full screen

display era, while the industry continues to follow this trend closely. It is
the first time a Chinese consumer technology industry is leading the
world’s evolution of technology.

Meanwhile, we’ve built the world’s biggest IoT platform with many
advanced smart devices in our ecosystem and continuous investment in
cloud services. We are also among the first to launch AI products in China.

So far, we have applied for more than 24,000 patents globally with 5920 of
them granted, among which half are global patents.

2) Firm focus on quality, showing significant improvement

Quality is the lifeline of our company’s development. In early 2017, Xiaomi

set up its Quality Control Committee with me as chairman. The quality of
Xiaomi’s products and services is the most important mission of the
company and we will improve product quality regardless of cost.

After a year’s efforts, our quality has improved significantly based on our
original standards and these efforts have been widely recognized. Recently,
Xiaomi was among the top ten in the “Made in China 2025” quality award,
and I was also honored to receive a Quality personality award and was
elected as Deputy Chairman of the China Quality Committee.

3) Rapid growth in our global business, with Xiaomi becoming #1 in India

and global markets flourishing

We are present in 70 countries and regions so far globally and became top
five in 16 markets. India is an extraordinary example. According to
multiple research firms, starting Q3 last year, our smartphone market
share in India has become number one. Also, with Indonesia representing

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 3 of 8
After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

Southeast Asia, Russia representing Eastern Europe, and Spain

representing Western Europe, all our markets have shown strong growth.

3. Bumper crop of design awards

Good design is a key part of the user experience, and right from the start, it
has been an important focus for Xiaomi. In fact, two of our co-founders
come from a background of industrial design and have extensive
experience in the field. Our ongoing investment in design was greatly
recognized in 2017 when we received a host of design awards, including
four major awards (IDEA Gold, iF Gold, Red Dot Best of the Best, Good
Design Best 100). Led by Mi MIX and Mi MIX 2, five Xiaomi smartphones
bagged international design awards. The Mi MIX series was even displayed
as exhibits by a range of top museums including Centre Pompidou in
France, Finland’s Design Museum and Germany’s Die Neue Sammlung.

Our success comes from the core of our business model:

Winning the lasting trust of our users

Amidst the difficulties and challenges we faced, we still achieved amazing

results. This victory is possible only because of the effort that our 18,000
employees have put in, the unrelenting support of our Mi Fans, and
ultimately Xiaomi’s business model and values.

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 4 of 8
After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

2017 holds a deeper meaning for us — alongside our miraculous comeback,

doubts about our business model have been entirely crushed. Our business
model has been thoroughly tested and we have gained a lot of confidence
that we are on the right path, with the right values and the right culture.

We believe that rather than pursuing short-term gains in terms of

hardware profit, making sure that our products have a good user
experience will enable us to succeed in the long term. Instead of many
layers in the distribution channel adding multiple costs to a product,
honest pricing will win our users’ hearts. As long as we continue delivering
products that are innovative, powerful, with high quality and great design,
and with an honest price tag, we can win the lasting trust of our users.

And winning the lasting trust of our users is the most important thing to
us. Some users have said that they can walk into a Xiaomi store, close their
eyes and buy anything, because they are confident that our products offer
the best quality and price. This is a really strong affirmation for us as this is

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 5 of 8
After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

exactly the ultimate goal we are pursuing. By continuing to win the trust of
our users, our users will choose our products without thinking twice, and
our highly efficient business model can be truly realized.

A new journey in 2018: Expanding around the world and staging

a comeback in China

2018 marks the start of a new journey for Xiaomi, and it is bound to be a
magnificent year. We have built a solid foundation over the last seven
years, and we will ride on this momentum for greater expansion, growth
and quality improvement.

While continuing to focus on technology innovation and quality

improvement, we will also put in a lot of effort in our overseas expansion.
In 2017, I went to India three times, Indonesia twice and Vietnam once,
and I saw huge and exciting opportunities wherever I went.

We have entered more than 70 markets globally and established a leading

position in many of them. But this is just a start. There is still a lot of room
for growth in the markets we are present in, and we have yet to enter many
more markets around the globe. Overseas markets represent huge
opportunities for us and we need to give more support in terms of strategy,
resources, and localized product development, as well as send more of our
employees out to the rest of the world.

On the domestic front, we have to start a full counter-attack and

accumulate small successes into a full victory, sparing no effort to ensure
that we have the ultimate victory in 2019.

In 2018, the Chinese smartphone market is poised to experience a decline

for the first time after more than a decade of growth. The market is
consolidating while the competition becomes more and more brutal. There
is no turning back for us and we have to charge forward. The Chinese
market is Xiaomi’s foundation. It is the biggest consumer electronics

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 6 of 8
After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

market in the world and the most competitive one. Only by winning in the
domestic market can we have enough support for global expansion. Only
by winning in China, can we win in the rest of the world.

So this year I am setting a new goal: We will regain the #1 position in

China within 10 quarters.

In this battle, we should move firmly forward and set up command center
at the front line. We cannot afford to lose any province, city, county and
community. We should remain brave and alert, and fight to the end.

This requires us to have strong management and organizational

capabilities on all fronts. So from now on, we will nurture and promote a
fleet of young and capable managers, creating a more dynamic and
progressive team. We will make sure that capable, ambitious, aggressive
and daring talent can learn how to fight and grow rapidly.

To everyone at Xiaomi, thank you all for your continued hard work! I hope

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 7 of 8
After crossing RMB 100B revenue milestone, a new journey for Xiaomi begins in 2018 – Mi Blog 2/12/18, 2'07 PM

you grasp all the opportunities in this great era and bravely shoulder your
responsibilities. Let us embrace the great opportunities and challenges,
and have the ambition to build a great business! Let us take on the mission
of delivering innovation to everyone in the world, and write a new chapter
in Xiaomi’s journey!

Lei Jun

2/7/2018

http://blog.mi.com/en/2018/02/07/after-crossing-rmb-100b-revenue-milestone-a-new-journey-for-xiaomi-begins-in-2018/ Page 8 of 8