Xiaomi Tuesday reported its revenue grew 15% year-on-year in the second quarter as the Chinese smartphone maker is selling more higher-priced handsets.

Why it matters: The Beijing-based company is sharpening its focus on the fast-growing premium handset segment as the global smartphone market continues declining.

  • Worldwide smartphone shipments dropped by 2.3% year over year in the second quarter, which marked the seventh consecutive quarter of decline, according to market research firm IDC.
  • The global shipments of premium smartphones, which cover devices priced above $400, grew 18% in 2018 despite the slowdown in the overall smartphone market, according to research firm Counterpoint.
  • Xiaomi said revenues from handsets priced over RMB 2,000 (around $283) accounted 32.3% for its total smartphone sales, while the average prices of its handsets in domestic and overseas markets have grown 13.3% and 6.7%, respectively.

“We are at the eve of explosive growth that will be brought by 5G and we are now in the period of a series of brand adjustments…Xiaomi will invest more in the research and development of middle-to-high-end handsets before the 5G era comes.”

Chew Shou Zi, chief financial officer at Xiaomi, in a conference call with analysts on Tuesday

Details: The company’s revenue in the second quarter rose to RMB 51.95 billion from RMB 45.24 billion a year earlier.

  • Net profit for the quarter slumped 87% yearly to RMB 1.96 billion from RMB 14.65 billion a year ago.
  • Revenue from its smartphone business grew 5% to RMB 32 billion in the quarter after selling 321 million handsets worldwide.
  • The profit margin of its smartphone business rose to 8.1% in the second quarter, compared with 3.3% in the first quarter.

Context: Xiaomi spun off its Redmi, a sub-brand for its budget phones, in January in a bid to focus on the premium handset market.

  • The move followed Huawei, the second-largest smartphone vendor in the world, which established a secondary smartphone brand with its budget-priced Honor line in 2013.
  • Vivo, China’s second-largest smartphone maker, in February rolled out a premium handset brand iQOO costing more than RMB 5,000.

Wei Sheng

Writing about semiconductors and telecommunications.

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