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(Reuters) - Chinese handset maker Xiaomi Technology is looking to raise more funds within the next year or two to boost production and sees revenue in the future coming from software applications rather than handset sales, the firm's president told Reuters on Monday.
Xiaomi, whose name literally means millet but refers to a revolutionary idiom from the early days of the Chinese Communist Party, was founded in 2010 with a focus on becoming a mobile Internet company.
The firm's first handset, called MiOne, was released in October to popular and critical acclaim, its draw being that it boasts high-end technical specifications, such as a dual-core processor and an eight mega-pixel camera, at an affordable price of 1,999 yuan ($320) -- less than half that of similar models from Apple Inc and Samsung Electronics.
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Xiaomi racked up more than 300,000 orders for the phone in less than two days at its launch, and it is now perpetually back-ordered, pointing to the need to expand production capacity.
"Manufacturing a phone is very capital intensive; it requires a large flow of capital," Lin Bin, president of Xiaomi, said in an interview.
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"Within the next one to two years, we will have to select a time frame to raise and find suitable financing," Lin said.
Xiaomi has raised $131 million in financing so far, including a B-round investment of $90 million done late last year that valued the firm at $1 billion.
Xiaomi's chief executive Lei Jun told local media that his firm was targeting 5 billion yuan ($793.9 million) in revenue this year on 2 million handsets sold.
"I think that is a very conservative number," Lin said of that sales target.
FOCUS ON USERS, NOT PROFITS
The low price of the smartphone is due to Xiaomi selling the MiOne directly to customers via its website, thereby cutting down on distribution costs, Lin said.
"We are really not looking to make a lot of profit on the handset itself," Lin added.
Lin was formerly the vice president of Google Inc's China Engineering Research Institute and he also previously worked at Microsoft Inc. The plan is for Xiaomi to monetize its software and applications in the future, he said.
Beijing-based Xiaomi is looking to push out a new phone once every 9-12 months and will seek to break even on each handset.
