An 87% drop in profits for Xiaomi as the international smartphone market slows down
The world’s 4th biggest smartphone maker, Xiaomi Corp, on Tuesday announced an 87% fall in its net profit figures for Q2, as global smartphone markets continue to experience a slowdown.
The Chinese firm’s Q2 net profits were reported to be at 2B yuan ($284M), a steep fall from the 14.6B yuan figure seen last year. Total revenue figures increased 15% to 51.9B yuan, increasing from 45.2B yuan seen last year, which was primarily driven by Xiaomi hiking the average sales price of its smartphones.
Although the industry is experiencing a slowdown, Xiaomi’s CEO, chairman, and founder Lei Jun stated that his firm was preparing for key growth opportunities down the road.
He stated that Xiaomi would be strengthening its R&D investments and capabilities, especially in areas like IoT, 5G technology and artificial intelligence.
The firm, whose stocks went up by 3.17%, closing at around HK$9.43 on the HKSE this Tuesday, has also invested in over 270 firms, with its total book value estimated at 28.7B yuan.
Lei mentioned that several inroads were being achieved by the firm in its foreign operations. He said that Xiaomi’s unyielding efforts were paying off, enabling solid growth rates in their businesses.
Xiaomi announced a whopping 33.1% rise in revenue collected from its foreign markets to around 21.9B yuan during Q2.
Xiaomi, who is listed on the HKSE, has pledged to resume expanding and building its retail channels located outside China. The firm is operating over 520 Mi stores in foreign locations as of Jun 30, which is an around 92.6% YoY surge.
In India alone, the firm has over 1790 Mi Stores, exclusively catering to India’s rural areas and Tier-2 cities during this period.
Xiaomi’s CFO Chew Shou Zi stated that 5G’s official commercialization plans had brought forth new prospects to be exploited in Chinese smartphone markets. This announcement was made via conference call in a post-earnings announcement.
He stated that Xiaomi, which had introduced its 1st smartphone in a launch held in Barcelona back in Feb, will launch another 5G phone in China during the 2nd half of 2019. However, no additional details were announced.
To ensure this move’s success, Vivo, Oppo and Xiaomi have allied together, which would allow wireless file transmissions between Android phones manufactured by these 3 companies, he said, who are the biggest China-based rivals of smartphone-maker Huawei Tech.
Chew welcomed other brands to join in as well, adding that several brands had already approached them for talks.
He mentioned that Xiaomi Corp was increasing its investments in several core components. Its end goal is to build a sustainable ecosystem of several advanced & competent supply chains based out of China. However, he stopped at that and didn’t elaborate any further.
Vivo, Oppo, and Xiaomi have all seen their smartphone market shares shrink last quarter due to Huawei’s increased efforts targeting the country. The latter is also dealing with its blacklisting by the US administration and battling security concerns regarding its handsets in several markets. China is the biggest smartphone market in the world.
A major 19% shipment drop hit Xiaomi in China in Q2, signifying the greatest decline among the country’s biggest smartphone vendors.
Ronnie Ho, CCB International analyst claims that there are no signs of the easing of competition, as Huawei keeps up the pace.
Smartphone shipments have declined all over the world by 2.3% in Q2, with 333.2 million units as the final number. Huawei, however, somehow managed not only to preserve, but to increase its market share to 17.6% on shipments that amounted to 58.7 million smartphones, according to industry experts.Source