Xiaomi’s quarterly revenue fell nearly 10 percent as the company struggled with a declining global smartphone market and weak consumer demand at home.
Sales of mobile devices fell 11 percent, leading to declines in the company’s smart electronics and internet services divisions. The Beijing-based company posted revenue of CNY 70.5 billion (about Rs. 80,900 crore), slightly above estimates. But it reported a surprise net loss of CNY 1.5 billion (about Rs. 1,711 crore) for the quarter through September, reflecting a nearly CNY 3 billion (about Rs. 3,422 crore) write-down on items such as investment losses. Adjusted net profit, which excludes exceptional items, topped analysts’ estimates.
China’s Covid-Zero policy has wreaked havoc on the country’s tech industry and supply chains, weighing on economic activity. At the same time, demand for electronics is cooling as buyers respond to high inflation and slowing economic growth. Global smartphone shipments are at multi-year lows amid weak demand, but Xiaomi has gained market share in Europe, executives told reporters on a conference call.
“The challenge in China is Covid, the pandemic situation is still unstable,” said President Wang Xiang. “There is still room for growth in overseas markets,” he added.
Global smartphone sales will fall 2.9 percent next year after a 12.2 percent decline in 2022, Jefferies forecast this month. Xiaomi unit sales will decline this year and next before recovering slightly in 2024, Jefferies predicted.
That’s partly because the phones that have sold in recent years have been well-built, leaving consumers with little need to buy new ones, Jefferies analysts including Edison Lee and Nick Cheng said in the Nov. 9 note. And new models add little innovation, they said.
“Structural weakness is worse than expected,” the analysts wrote, adding that the challenges are “exacerbated by a weak economy.”
What Bloomberg Intelligence says China’s smartphone sales decline could extend into 2023, even as the September shipment decline narrowed. A boost from the iPhone 14 launch could be a one-off, and Android weakness looks set to be overwhelming in the coming months. Continued declines in business PC shipments suggest the post-lockdown business outlook remains cautious — Steven Tseng and Sean Chen, BI analysts.
Xiaomi reported its first revenue decline in the first quarter, followed by a 20 percent revenue decline in the June quarter.
Even world leaders have not been spared. Samsung Electronics, the world’s largest maker of phones, displays and memory, cited falling handset sales in China as a drag on its components business. Apple Inc. expects to produce at least 3 million fewer iPhone 14 units this year than originally anticipated, people familiar with the plans said, largely because of weaker demand for lower-cost versions of the model.
Shares of Xiaomi have fallen by half their value over the past year, leaving the electronics giant with a market cap of around $31 billion. Still, it’s outperforming some of its domestic phone makers, such as Oppo and Vivo, thanks to its broader international footprint and distribution.
Co-founder and Chief Executive Officer Lei Jun has made electric vehicles Xiaomi’s guiding principle for future growth, pledging $10 billion (roughly Rs. 81,780 crore) in investment and setting up a separate company for the venture. Xiaomi has made progress in this area, Wang said, without elaborating.
That project, however, will take years to come to fruition, leaving the company dependent on a recovery in consumer spending on electronics to revive its ailing fortunes. Sales of Android devices, where Xiaomi competes with Samsung in international markets, are not expected to recover quickly, especially in its home country of China.
© 2022 Bloomberg LP
