【Focus on IPO】Sunmi Technology's Hong Kong Stock Listing: The World's No.1 "Seller of Shovels" — Why Is It Stuck in Low Profit Margins?

Ask AI · How can Sunmi Technology’s PaaS platform break through the software revenue bottleneck?

By | Ning Chengque

Source | Boyang Finance

With the halo of being “the No. 1 provider of global Android-based commercial IoT (BIoT) solutions,” behind which stand three internet giants—Alibaba, Meituan, and Xiaomi—with a business footprint covering more than 200 countries and regions worldwide—this company, Sunmi Technology, has recently passed a hearing at the HKEX and is only one step away from listing.

However, beneath the halo, there are also serious concerns.

The prospectus shows that while Sunmi Technology holds the No. 1 global market share, it has long been stuck at the lower end of the low-margin “smiling curve.” Although it leans on three major giants, it still struggles to escape the awkwardness of “dependent growth.” Even more worrying is an overseas arbitration case worth as much as $354 million that remains unresolved; the amount is equivalent to more than 70% of the company’s full-year revenue in 2024.

This “hidden champion” that transitioned from a food delivery platform, on its IPO path is not only a drive through capital hurdles—it also reflects the deeper difficulties faced by China’s hardware manufacturing companies. When leading scale hits the ceiling, how can you move from “getting big” to “getting strong”?

01

The contrast between “global No. 1” and “low gross margins”

Sunmi Technology’s founder, Lin Zhe, is a typical Chaoshan entrepreneur.

In 1994, at the age of 19, Lin Zhe graduated from Shantou Suobin Vocational Middle School. Instead of continuing his education, he jumped headfirst into business—starting with the computer field he was familiar with—and opened a computer sales company. In just two short years, he grew the company’s sales to 3 million yuan per month, becoming the largest computer retailer in the Chaoshan region.

But Lin Zhe was not satisfied with his results.

In 1996, he founded “Guangdong Chuantian,” becoming the first private POS terminal company in China, and also the first Chinese company to sell POS devices to overseas markets. At that time, China’s POS terminal market was almost monopolized by overseas brands such as IBM. A single device cost as much as 38,000 yuan. Lin Zhe entered the market at less than one-tenth of that price, rapidly opening the space.

After that, Lin Zhe’s entrepreneurial trajectory always stepped into the right moments of the times. In 2013, he entered the food delivery platform space and founded “You Have Food Delivery.” In 2016, at the peak of the food delivery wars, he decisively pivoted to intelligent commercial hardware and launched the world’s first Android POS terminal, V1. In 2018, he partnered with Alipay to release a face-recognition payment device, leading a payment revolution.

Today, Sunmi Technology has grown into a leading player in global Android-side commercial IoT.

According to a Zhiyan Consulting report, based on revenue in 2024, Sunmi Technology holds more than a 10% share of the global Android-side BIoT market and firmly ranks No. 1. The company has served more than 70% of the top 50 food and beverage enterprises worldwide. In China, it has achieved coverage of more than 70% of the top 100 catering brands and more than 60% of top 100 chain stores.

From a small POS terminal to building a global commercial IoT ecosystem, Lin Zhe has shown over 30 years that education level is never the ceiling on the path to entrepreneurship—vision and execution are.

However, behind the impressive industry standing lies a set of highly tense financial figures.

From 2022 to 2024, Sunmi Technology’s revenue was 3.4B yuan, 3.07B yuan, and 3.46B yuan, respectively; profits for the year were 160 million yuan, 101 million yuan, and 181 million yuan, respectively.

In the first three quarters of 2025, the company generated revenue of 2.24B yuan, up 2.1% year over year; profit during the period was 56.08M yuan, up 32.83% year over year.

But the gross margin tells a different story.

From 2022 to 2024, Sunmi Technology’s gross margins were 28.12%, 26.74%, and 28.85%, respectively—staying below the 30% line. In the first three quarters of 2025, the company’s gross margin reached 32.9%, but compared with peers, it still remains far behind.

When compared with peer companies in the industry, Bai富环球 listed on the Hong Kong Stock Exchange had a gross margin of 47.2% in 2024, while Newland listed on the A-share market had an overall gross margin of 36.50% in 2024; within the intelligent terminal cluster, gross margin was even higher at 38.53%. All of these are clearly higher than Sunmi Technology.

To understand this predicament, it’s helpful to look at two giants at both ends of the consumer electronics industry value chain. One side is Apple, whose software and services gross margin exceeds 70%. It firmly controls design, the system, and the ecosystem, capturing the highest share of profits. The other side is Foxconn, whose gross margin is only around 6%, but by leveraging extreme scale effects—annual revenue of more than $200 billion, more than 100 times that of Sunmi Technology—it found a way to survive within thin-margin contract manufacturing.

Sunmi Technology is precisely stuck in the middle. It “wants to be Apple”—developing a commercial operating system, SUNMI OS, and a BIoT PaaS platform, with low-code modular tools and an app marketplace—yet software and services revenue accounts for less than 1%. It “also wants to be Foxconn,” but its scale is not yet sufficient to form overwhelming cost advantages. In 2024, Sunmi Technology’s revenue was RMB 3.46B, which pales in comparison with Foxconn’s annual revenue of over $200 billion.

Beyond the scale disadvantage, the more fundamental constraint comes from the production model.

Based on estimates, more than 90% of the intelligent devices sold by Sunmi Technology are produced by OEM/ODM factories. Within the company’s main business cost structure, direct materials account for as much as about 95%. This asset-light rapid expansion model helps it secure the No. 1 share in the global market, but it also sows hidden risks: weaker control over the supply chain may expose it to risks such as insufficient capacity or delayed delivery.

02

99% of the hardware can’t support a “platform” dream

In its prospectus, Sunmi Technology positions itself as a “provider of commercial IoT solutions,” not merely a hardware manufacturer. But reality is harsh.

In 2024, Sunmi Technology’s revenue from selling intelligent devices was 3.44B yuan, accounting for 99.5% of total revenue. Revenue from the PaaS platform and customized services was only 18.38M yuan, representing 0.5%. In the first nine months of 2025, the share of software services eventually rose to 1.0%, but it still remains far from the narrative of “one integrated system of software and hardware.”

Between high-margin software services and an extremely low share of revenue, a business proposition remains unsolved. In the first three quarters of 2025, Sunmi Technology’s gross margin for PaaS and customized services reached 77.2%, far exceeding the hardware business. However, the overly small revenue base limits how much it can lift overall profitability.

The key lies in the underlying logic of To B customers.

When a restaurant owner buys a point-of-sale terminal, their core requirement is a tool that is “workable, cheap, and stable,” not a complex PaaS ecosystem. Sunmi Technology’s app marketplace has more than 32k apps, with cumulative downloads of over 200 million times, and over 41k registered developers. But for terminal merchants, these numbers are mostly supplemental value, not the core driver of purchasing decisions.

“One thing Sunmi’s customers want first is a machine that can process payments; the ecosystem is icing on the cake, not something that’s indispensable in a pinch.” A venture capitalist who has long focused on deep tech tracks said this.

Compared with the development path of US peer Square (Block)—starting with hardware card readers, gradually building a merchant services ecosystem, and ultimately having software and services make up more than half of revenue—Sunmi Technology is still in an early stage of ecosystem building. Its direction aligns with industry evolution trends, but the channel from “hardware to attract traffic” to “software monetization” has not yet been truly opened.

Sunmi Technology’s shareholder roster is truly impressive. Ant Group holds 27.27%, Meituan holds 8.20%, and Xiaomi holds 7.78%. Three major internet giants are all backing it, forming a solid capital foundation. In addition, Shenzhen Capital (Shenchuangtou) holds 6.88%.

From a positive effects perspective, Sunmi Technology’s rapid growth is inseparable from the resource synergy and scenario support of strategic shareholders. Sunmi is a core equipment supplier for Ant Group’s “face recognition payments” and “Alipay touch” businesses. In domestic catering and offline merchant scenarios, Meituan promotes the widespread adoption of Sunmi POS terminals. Xiaomi’s Mi Home ecosystem also provides Sunmi with early access scenarios.

However, the deeper predicament brought by ecosystem dependence is equally evident. In the face of big players, Sunmi Technology may be an important “supplier,” but it is not an irreplaceable “partner.” When big players need to control costs, they may introduce a second supplier. When they need to optimize data interfaces, the data may flow to other giants’ cloud services rather than Sunmi Technology’s platform.

This predicament is particularly clear in customer data.

From 2022 to 2024, Sunmi Technology’s total customer count fell from 2,506 to 2,262. In the first three quarters of 2025, it further declined to 1,965—down more than 20% over several years.

By contrast, the number of monthly active devices continued to rise—from 3.2 million in 2022 to 5.8 million by September 2025. The divergence between customer contraction and device expansion reflects a deeper issue: existing customer value is improving, but customer acquisition at the margin is weak.

As globalization advances steadily, Sunmi Technology’s overseas business in 2025 encountered major legal and partnership risks. A dispute over an exclusive distribution agreement with Brazil’s largest customer became one of the core risks most closely watched during IPO review and market assessment.

This “Brazil customer B” weighs heavily in Sunmi’s financial statements. In 2022, sales to customer B were 370 million yuan, accounting for 10.9%, making it the second-largest customer. In 2023, sales to customer B were 505 million yuan, accounting for 16.5%, making it the largest customer. In 2024, sales to customer B were 759 million yuan, accounting for 22.0%, maintaining customer B as the top customer.

Because customer B repeatedly delayed payments, in August 2025 Sunmi issued a final payment reminder notice and legally terminated the agreement in September. Subsequently, without submitting arbitration, customer B obtained a ruling from a Brazilian court requiring Sunmi to continue fulfilling the agreement. In December 2025, customer B filed for arbitration with the International Chamber of Commerce, claiming approximately $353.9 million and requesting a five-year non-compete restriction.

This amount is equivalent to more than 70% of Sunmi Technology’s full-year revenue in 2024. Although Sunmi Technology is actively responding to the case, the Brazilian court’s temporary injunction remains unresolved, casting a shadow over the company’s business expansion in South America.

Even more concerning is that the company’s trade receivables turnover days have been increasing year by year. 36 days in 2022, 62 days in 2023, 89 days in 2024, and 99 days in the first three quarters of 2025. As the cash collection cycle keeps extending, exchange-rate volatility and credit risk in emerging market business rise accordingly, and the risk of bad debts has increased.

Faced with multiple predicaments such as low hardware gross margins, customer loss, and overseas risks, Sunmi Technology’s response strategy is driven by “globalization” and “heavy assets” operating in tandem.

In terms of globalization, more than 70% of the company’s revenue comes from overseas. It has gradually built localized operating systems in regions including North America, Europe, and Latin America, and has carried out deep cooperation with international ecosystem partners such as Stripe and Google. This means that even if domestic giants’ businesses fluctuate, Sunmi Technology still has broad buffers.

In terms of heavy assets, the focus of this IPO’s fund-raising is to expand its own factories—precisely to take control of the lifeline of the supply chain. Moving from an asset-light contract manufacturing model to a hybrid model of “own capacity + contract manufacturing” will increase capital expenditures in the short term. But in the long run, it will significantly enhance delivery capability and quality control, and reduce reliance on a single supplier.

In terms of ecosystem building, Sunmi Technology launched the industry’s first commercial IoT PaaS platform, “Sunmi Mega App,” a low-code development platform consisting of more than 1,000 modules. By the end of 2024, the platform had been adopted by more than 7,000 companies worldwide and covered more than 20 vertical fields.

At the 2025 SUNMI Developer Conference, founder Lin Zhe proposed “3 beliefs.” The first: that super-light terminals will have broader application scenarios. The second: that Sunmi will inevitably become a company integrating software, hardware, and a unified ecosystem platform. The third: that BIoT will help achieve data interoperability and connectivity for offline commerce in the future.

This is Sunmi’s strategic anchor—and the crucial leap in its transformation from “selling shovels” to “building mines.”

Conclusion

Sunmi Technology’s IPO process concentrates the strategic direction and real challenges of China’s hardware tech companies’ global expansion. From a middle-school vocational student in Chaoshan to the person steering a global BIoT unicorn, Lin Zhe has spent 30 years writing a grassroots tale of a comeback. But the harshness of the capital markets is that they don’t care about past stories—they only ask about the room for imagination in the future.

For Sunmi Technology, the real test is whether it can, under industry competition and market expectations, successfully realize the transition from selling hardware to ecosystem services, and genuinely run a business model of “hardware entry + software monetization.”

This is not only a key development bottleneck that Sunmi Technology needs to overcome, but also an important issue that many Chinese tech companies facing platformization transitions from hardware businesses will encounter together during global development.