The BOM (bill of materials) cost of Xiaomi 10's 12GB + 256GB version is about $490 and after deducting related expenses and income tax, the net sales margin is much lower than 5%, Chen Hang, an analyst at Founder Securities, said in a report yesterday.

On February 19, 2020, the third-party agency Tech Insight released a report that the 12GB + 256GB version BOM of Xiaomi 10 costs about $440, equivalent to about RMB 3089, and a gross profit margin of about 34%.

However, Founder Securities analysts believe that since the latest accessories such as the Snapdragon 865 platform, LDRR5, 108MP camera, UFS3.0 are launched in China, premiums need to be paid, so the actual BOM is initially or higher than $440. According to its calculations, it should be Around $490.

In addition, considering the value-added tax and patent fees, its comprehensive net margin is expected to be much lower than 5%, and the long logic is unchanged.

Here is the full text of his report:

1 Xiaomi 10 Net sales margin is expected to be well below 5%, long logic unchanged

The actual BOM is around $490.

On February 19, 2020, the third-party agency Tech Insight released a report that the 12GB + 256GB version BOM of Xiaomi 10 costs about $440, equivalent to about RMB 3089, and a gross profit margin of about 34%.

Since the latest accessories such as the Snapdragon 865 platform, LDRR5, 108p camera, UFS3.0 are launched in China, premiums need to be paid, so the actual BOM may be higher than USD 440 in the initial stage.

According to our estimates, it should be around $490.

Considering the value-added tax and patent fees, the comprehensive net interest rate is expected to be much lower than 5%, and the long logic is unchanged.

According to the company's management's definition of sales and net profit margin, that is: comprehensive net profit margin = (hardware-related revenue-hardware-related costs-hardware-related expenses-hardware-related income tax) / hardware-related revenue, the calculation of comprehensive net profit margin still needs to consider 13%. VAT and patent fees, after deducting related fees and income tax, the comprehensive net margin of Xiaomi 10 series is expected to be much lower than 5%, and the long logic is unchanged.

2 Excellent performance, high price, ASP is expected to increase

Xiaomi Mi 10 has excellent performance. Xiaomi Mi 10 is equipped with Snapdragon 865 + LPDDR5 + UFS 3.0 + Wi-Fi 6 + 1 million-pixel 8k movie camera. The Snapdragon 865 platform leads the performance in the same period of 5G SoC.

According to the press conference, the new product is better than competitors in terms of running points, and the company believes that Xiaomi 10 is ahead of competitors.

Pricing goes high-end and ASP is expected to increase.

The different versions of Xiaomi 10 are priced at 3999 yuan (8GB + 128GB), 4299 yuan (8GB + 256GB), 4699 yuan (12GB + 256GB), and the pricing has entered the price range of 4,000-5000 yuan, further moving towards the high end. With the sale of Xiaomi 10 in the future, the company's blended ASP is expected to increase, and growth is expected.

3 The epidemic has cooled the global mobile phone industry, Xiaomi has a comparative advantage

The spread of the epidemic has cooled the global mobile phone market. According to Trend Force's calculations, affected by the epidemic, the global smartphone market ’s 1Q20 production volume was reduced by 10.4% from the previous forecast.

Considering that Xiaomi's main sales channel is online, it is expected that the affected by the epidemic will be less than that of competitors.

The domestic shipments in 2020 are expected to decline to 300 million due to the impact of the epidemic. Considering the impact of the epidemic on household consumption, the median domestic smartphone sales price may decline in 2020. Due to the earlier release of new products and high cost-effectiveness, it is expected to gain a comparative advantage in 5G mobile phone sales in 2020.