Xiaomi to Boost Production, Generate Cash From App After New Financing Round

Another round of funding has valued Chinese-owned handset manufacturer Xiaomi Tech at $4 billion. There is a rumor saying that savvy internet Venture Capitalist and Russian billionaire Yuri Milner is one of the investors behind the financing, which is in the final stages of negotiation, a source close to Xiaomi said. The potential valuation is half of Finland Nokia’s market cap and pretty close to RIM’s $5.4 billion.

We earlier reported on a few stories about Xiaomi. ZDNet Asia reports that with 5 million units targeted throughout the year, the Chinese company will book $15.7 billion annual revenues, leading to an increase in net profit of $393 million. Last month, Xiaomi announced that sales had reached 1.8 million units since it started September 2011.

Xiaomi’s strategy heavily relies on sales volume, since each device sold only accounts for a small margin. The company relies on online channels and word of mouth to market the smartphones. To increase user engagement and loyalty, customers are encouraged to participate by giving feedback. Additionally, founder Lei Jun says that the company takes “a third of the design ideas from the users.”

Local giants such as Baidu, Tencent and Alibaba have just started to offer their “affordable” smart phones that run on Android or their own OS bundled with tons of locally-developed apps, The Beijing-based Xiaomi has the competitive advantage, in that they have offered integrated hardware, software, apps and services since day one. They are delivering what may be the best user experience for Android users at a low price.

Xiaomi’s market is even better in urban areas, as there are a lot of consumers in these regions profiled to be wanting a high-specification smartphone at a moderate price.

Xiaomi’s Lei has told Reuters earlier this year that once the company raises another round of funding, its facilities will boost the production and generate more money from its in-house applications, promising a steady revenue stream.