On November 27th Xiaomi Group reported third-quarter results. The company reported third-quarter revenue of 53.66 billion yuan, up 5.5 percent year-on-year, and adjusted net profit of 3.472 billion yuan, up 20.3 percent year-on-year. Revenue and profit both exceeded market expectations. However, Xiaomi’s smartphone sales and revenue fell year-on-year in the quarter.
Sina Technology Zhang Jun
Xiaomi CFO Zhou said in a conference call that the current 4G to 5G switching period, Xiaomi chose to absorb the bad inventory to improve profitability and cash reserves.
In the quarter, Xiaomi’s research and development investment reached 2 billion yuan, up 32.5% year-on-year and hitting a quarterly high.
Smartphone sales of 32.1 million units bet 5G
Xiaomi’s smartphone stake reported revenue of 32.3 billion yuan in the third quarter, down 7.8 percent from a year earlier, and 32.1 million smartphonesales in the third quarter, compared with 33.3 million units in the same period last year.
But Xiaomi’s share of the global smartphone market in the third quarter of 2019 was 9.2 percent, still ranked fourth, according to Canalys.
For smartphone revenue and sales decline year-on-year, Xiaomi CFO weekly investment said: “We are now in the 4G to 5G switching period, the mobile phone market environment pressure, we have chosen to steady growth, improve our profitability and cash reserves, the bad inventory are digested, so we are in a very healthy period, For the 5G era, we are very confident, we are very good at high-tech technology to the public, 5G mobile phones just come out will be more expensive, and our efficient business model advantages can also be reflected. “
Lei Jun also said that Xiaomi for the 5G mobile phone transition, this year has begun to prepare. So far, Xiaomi’s inventory is at very low water levels, laying a good foundation for 5G.
5G will no doubt be a focus of Xiaomi’s smartphone business next year. Xiaomi has released two 5G phones in China this year, and the Redmi K30 series of Redmi’s 5G phones will be released in December. In addition, Xiaomi chairman Lei Jun also previously revealed that Xiaomi next year will have more than 10 5G mobile phone release, more than 2000 yuan of products will be 5G mobile phones.
In addition, the arrival of 5G will further promote the outbreak of IoT categories.
In the quarter, Xiaomi IoT and consumer products business revenue reached 15.6 billion yuan, up 44.4% year-on-year. As of September 30, 2019, the number of devices connected to Xiaomi IoT platform, excluding smartphones and laptops, reached 210 million units, an increase of 62.0% year-on-year.
Nearly half of overseas income
In the third quarter, Xiaomi’s overseas market revenue was RMB26.1 billion, up 17.2% YoY, accounting for 48.7% of total revenue. Overseas market revenue as a share of total revenue also reached a quarterly high.
Since 2017, Xiaomi has been pushing ahead with its internationalization strategy. Xiaomi’s smartphone shipments are among the top five in more than 40 countries and territories, according to Canalys. One of the most typical countries that makes Xiaomi international is India, where Xiaomi smartphones have been the number one in shipments for nine consecutive quarters, according to IDC.
This year, the European market is xiaomi’s international focus. In the third quarter of 2019, Xiaomi smartphones ranked fourth in Western European shipments, up 90.9 percent year-on-year, while Spain ranked second in open channels, with 63.7 percent year-on-year shipments, according to Canalys. The market share reached 22.9%.
As to whether Xiaomi can further expand its share in the European market, Lei Jun said that Xiaomi entered the European market after all only two years, and the European market is half of the operator market, and operators business is public services, so Xiaomi needs a little time.
In addition, internationalization has become an important strategy after the Redmi brand becomes independent. Lu Weibing, Xiaomi’s vice president and general manager of Redmi Brands, said in an interview with Sina Technology that Redmi will continue to increase its investment in India and Europe this year, as well as new markets such as Latin America and Africa.
In the domestic market saturation, 5G mobile phone has not yet scaled the case, increase internationalization has become the common choice of many domestic mobile phone manufacturers. Mr Lei has previously said Xiaomi’s overseas earnings would soon surpass China’s.
Research and development investment of 2 billion yuan, a new quarterly high
In the quarter, Xiaomi’s research and development investment reached 2 billion yuan, up 32.5% year-on-year, also set a new high for Xiaomi’s single-quarter research and development investment.
From the smartphone business, Xiaomi’s research and development investment effect is also beginning to appear. Take MI’s 5G surround-screen concept phone, MIX Alpha, released in September, for example, which achieves 180.6% of the screen’s share through the surround screen design. It took 2 years to develop, before and after the investment of 1000 people, research and development investment of more than 500 million yuan.
Another product, the Xiaomi CC9 Pro, features a rear-mounted 5-camera design with a master camera of 100 megapixels, which ranks first in the DxO list with Huawei’s flagship product.
In a conference call, Mr. Lei said Xiaomi is expected to spend about 7 billion yuan on research and development this year. Next year will be a reasonable proportion, continue to increase research and development costs.
Earlier, Lei Jun said at the Xiaomi MIX Alpha launch that next year Xiaomi’s research and development investment will grow to about 10 billion yuan.