On the eve of the performance announcement, Xiaomi’s intraday share price surged 5% to a record high, giving a good start to the new quarter’s financial report.
On November 24, Xiaomi Group announced its performance report for the third quarter of 2020. Among them, revenue and net profit have achieved substantial growth over the same period last year, exceeding previous market expectations. After the Hong Kong stock market opened the next day, Xiaomi’s share price fell by more than 2%. President Wang Xiang said that the supply shortage may continue until next year, which may be an important reason for the decline in the stock price.
Looking back, Xiaomi was once the number one in China. However, with the rise of Huawei and OV, and the deviation of its own positioning, Xiaomi’s situation has become very embarrassing. After this year’s mid-term financial report, the stock price ushered in a long period of rise, revealing investors’ affirmation of its growth prospects. With the release of this financial report, perhaps we can explore more potential and challenges related to Xiaomi’s future.
“Selling mobile phones” has become the mainstay of Q3 revenue growth, and the European market is the trump card for growth?
According to the latest financial report disclosed by Xiaomi, revenue was 72.163 billion yuan, an increase of 34.5% year-on-year, and an increase of 34.8% from the 53.538 billion yuan in the previous quarter. Combining the performance of multiple consecutive quarters, it can be found that both the overall revenue and the year-on-year growth rate have reached record highs.
This is due to the fact that sales of smartphones, the main source of income, have replaced the relatively small proportion of Internet services and have become the driving force for overall performance growth. In the third quarter, Xiaomi’s smartphone sales revenue recorded 47.6 billion yuan, a year-on-year increase of 47.5%, accounting for approximately 66% of total revenue.
And Xiaomi’s achievements in this part of the business are inextricably linked to its sales performance. Data shows that Xiaomi’s smartphone shipments reached 46.6 million units, an increase of 45.3% year-on-year.
Among them, domestic and European markets have made important contributions. In the domestic market, due to the strong performance of the Redmi K30 series and the promotion of Xiaomi’s 10th anniversary in August; in the European market, the increase in operator channels has played a certain role. In addition, China Merchants Securities pointed out that despite intensified competition and earlier supply restrictions, Xiaomi still maintains its number one position in the Indian smartphone market.
Since the third quarter of this year, Xiaomi smartphones have occupied an increasingly important position in the global market. According to Canalys’ statistics, in the third quarter of 2020, global shipments surpassed Apple to rank third. The market share in mainland China rose from 9.0% in the same period last year to 12.6%, ranking fourth.
Unlike Xiaomi, the sales of Huawei and OV are somewhat unsatisfactory. According to Canalys statistics, the growth rates of Huawei mobile phones in the Chinese mobile phone market in the first three quarters were 1%, 8%, and -18% respectively; while OPPO’s domestic market shipments have seen a year-on-year decline for six consecutive quarters. The quarter also fell by 18% year-on-year.
In the second quarter of this year, Huawei may have chosen to make strategic adjustments to the mobile phone market, shifting its focus to mid-to-high-end 5G mobile phones that pursue revenue, thereby depressing shipments. This means that Xiaomi’s surge in mobile phone sales this quarter has been affected to a certain extent by Huawei’s strategy, which has weakened the competition between the two best-selling products in similar price ranges.
Returning to Xiaomi itself, although it has expanded its advantages in the competition, when its products are in the market, the sales of the mid-to-low-end Redmi series are far ahead of other models. In fact, this old-fashioned question still exists, and the sales data during the Double Eleven period proves this point even more.
Although Xiaomi has gradually achieved high-end and mature technology, many consumers still have the inherent impression of “mid-to-low-end” in their mobile phone products, so they have repeatedly run into walls on the road to advance high-end products. How to tear off the “cost-effective” label and change the general perception of domestic consumers will be a long-term problem that Xiaomi has to overcome in the field of smartphones.
IoT advantages widen Xiaomi’s moat, and many forces flood into the market
Xiaomi has long been aware of the problem of domestic brand positioning and is actively exploring overseas markets. In addition to the smartphone business, Xiaomi actually seized the opportunity in the IoT field and achieved good results. In this quarter, revenue from IoT and consumer products was 18.1 billion yuan, a year-on-year increase of 16.1%, which is already the second largest revenue pillar.
Xiaomi implemented the smart home IoT ecosystem earlier and has a relatively comprehensive product line. The types of products involved are more abundant, so it has gained the favor of many consumers. At present, the multiplier effect produced by mobile phones and AIoT strategies is gradually expanding.
As of September 30 this year, the number of AIoT connected devices reached 289.5 million, a year-on-year increase of 35.8%; the number of users with five or more devices connected to the Xiaomi AIoT platform reached 5.6 million. In addition, the number of monthly active users of “Xiao Ai” increased by 35.5% year-on-year to 78.4 million; the number of monthly active users of Mijia App increased by 34.2% year-on-year to 43.1 million.
Although Xiaomi has achieved leading results in the Internet of Things, the development of this field is still undecided at this stage. As a new track that appeared late, it has become a strategic option for many companies, so the pattern is relatively fragmented.
First of all, the domestic mainstream mobile phone manufacturers, Huawei and OV, are increasing their layout. Take Huawei as an example. This year, it has also put more energy on the Internet of Things market. Recently, it has launched 16 new IoT products in 11 categories. The most direct result of the layout is that its consumer industry revenue has already accounted for a very high proportion of current revenue, and its turnover has reached 467.3 billion.
What’s more worth mentioning is that home appliance companies have also begun to transform under the impact. Prior to this, Midea, TCL, etc. have chosen to adopt a cooperative model for the deployment of the Internet of Things market, but they are not satisfied with this at present. For example, Midea also launched the Midea Meiju APP to create a smart home life platform. TCL TVs, Haier refrigerators and Gree air conditioners have all joined the battle at the same time, hoping to occupy more market share in the IoT field.
Technology giants Baidu and Ali have launched their own smart speakers and other products, and many start-up vertical IoT companies have emerged on this track, making the current IoT market very complicated. And Xiaomi, who is in it, faces a lot of competition.
However, competition is accompanied by opportunities, and users have not yet formed a unified product line because of this competitive landscape. Xiaomi has a first-mover advantage, and whether it can better solve user pain points will be the key to further widening the gap.
Behind the accelerated ecological layout, is Xiaomi facing a “traffic dispute” in the 5G era?
In the domestic market, Xiaomi is one of the earliest companies in the mobile phone industry to implement the smart home IoT ecosystem. Last year, the “mobile phone + AIoT” was launched and tens of billions were invested to support the development of AloT. At present, the development of Xiaomi’s dual-engine strategy has gradually matured. Over time, Xiaomi has been continuously enriching the ecological chain and products. The Xiaomi ecosystem that this jointly constitutes is becoming larger and larger, and it is expected to bring greater imagination to it.
With the increase of Internet of Things devices, Xiaomi has previously focused on the development of Xiaomi’s miraculous sharing function to achieve ecological synergy and widen its own moat. The relationship established between rice and technology-mastering companies is also very close. As of the end of October, there have been more than 280 participating companies in Xiaomi Ecosystem, and 4 companies that have successfully landed in the capital market have been harvested.
With the endorsement of Xiaomi, the ecological chain enterprises and the Xiaomi brand have achieved common development. Xiaomi plays the role of shareholder, customer and channel. In the future, after helping companies under the ecological chain complete the listing, it will further consolidate its own ecology.
At the developer conference that ended not long ago, Xiaomi launched its self-developed Internet of Things operating system Vela platform. This action is also based on the ecology. Cooperate with manufacturers and developers to open up fragmented applications and continue to expand the ecosystem. With the help of this platform, Xiaomi becomes the underlying OS service provider, and has the right to speak in the era of the Internet of Everything, thereby digging out more value in the AIoT field.
However, other mobile phone manufacturers such as Huawei and OV are also creating an IoT ecological layout with mobile phones as the core. Under this layout, although there are differences in their development models, the final focus is on ecological construction.
For Huawei, the launch of Hongmeng OS is an important step, which is critical to ecological construction. In the future, after all its products realize self-developed operating systems, they will have control in their respective ecosystems, and will be able to better meet the huge market behind the era of Internet of Everything. As we all know, Huawei, as a domestic technology giant, has technical advantages. Although the current ecology is not as good as Xiaomi, with the rapid approach of the 5G+AI era, the construction of the future ecology will surely be a key part of Huawei that cannot be ignored.
In addition, Internet giants such as Ali and Baidu are also eyeing this market. The layout of Tmall Genie and Xiaodu series of smart speaker products are typical examples. Tmall Elf has cooperated with Yunmi and Stone Technology, while the latter has chosen to cooperate with traditional companies such as TCL. Both Alibaba and Baidu want to use this method to accelerate the development of the Internet of Things ecosystem in order to seize the right to speak in the future era.
Especially in the era driven by 5G+AI, the Internet of Everything has a greater possibility. The huge opportunities contained therein make Internet giants and technology giants unwilling to give up this huge traffic entrance.
This is why Ali has been working hard on Tmall Elf. In May of this year, Tmall Elf held a spring new product launch conference and announced that it will start 10 billion yuan in ecological construction this year, and will comprehensively deploy AIoT and content ecological fields around Tmall Elf. This is after the upgrade of Tmall Elf to an independent business unit in January this year, Ali once again added to this track. Through this diversion entrance, Tmall Elf can form a synergistic effect with Ali ecology.
Therefore, not only mainstream mobile phone manufacturers such as Xiaomi and Huawei, but also technology giants such as Ali and Baidu are becoming the players. The different genes of the respective companies determine the different ways of playing the market, but they are all in order to better meet the trend of the Internet of Everything era. It cannot be denied that Xiaomi currently has a first-mover advantage in the domestic Internet of Things field, but Xiaomi will not be a real winner under the undecided pattern.