Drop in smartphone demand leads to Xiaomi missing Q3 earnings and sales expectations
Company’s quarterly revenue plummeted almost 10% on the heels of a slumping smartphone market all over the world and weakened domestic demand.
Xiaomi reported 70.5 billion yuan (US$9.85 billion) in sales, which means a net loss of 1.5 billion yuan in Q3. Investment losses and other almost 3 billion yuan amounted to almost 3 billion yuan in write-offs. The anticipated numbers were 1.8 billion yuan in net profit and 70.2 billion yuan in revenue. Adjusted net income was greater than analysts expected.
Zero-Covid policy implemented in China has led to chaos in the domestic tech sector and disrupted supply chains, lowering economic activity in general. Meanwhile, the demand for all kinds of electronics is cooling, as inflation rises and economic growth slows down.
Global smartphone sales are predicted to experience a 2.9% decline in 2023 – that’s not bad compared with the sharp 12.2% drop in 2022. Xiaomi’s sales are bound to go down in both 2022 and 2023, while 2024 may bring a slight recovery. Phones sold recently are well-made, and there is no need to replace them in the near future. The fact that new models are adding very few innovations also lowers consumer interest in them.
Xiaomi reported its first sales drop in Q1, with Q2 demonstrating a 20% decline.
The global market leaders have not been spared either. Samsung Electronics Co, the world’s biggest maker of phones, displays and memory, reported the dropping handset sales in China as taking a toll on its electronic components business. Apple anticipates the number of iPhone 14s produced this year to be at least 3 million fewer than it expected initially.
Xiaomi shares lost 50% of their value in the past year, making the company’s market capitalisation approximately US$31 billion. Even so, it’s doing better than its domestic rivals Oppo and Vivo because of its greater international footprint.
Electric vehicles are supposed to become Xiaomi’s next growth point, as its CEO pledged US$10 billion in investment and separate company spin-off for this purpose. It will, however, take a long time to implement this project, so the problem of continuously lowered demand for consumer electronics will have to be resolved in a different manner. Demand for Android handsets is not bound for a quick recovery, particularly in China.