Chinese smartphone maker Xiaomi reported 5.5% year-on-year growth in third quarter revenue on Wednesday, in the company’s slowest-ever growth since its July 2018 listing in Hong Kong.
Why it matters: The underwhelming earnings report reflects the mounting pressure on Xiaomi as it faces aggressive competition from rival Huawei in China’s saturated smartphone market in the past few quarters.
- The Beijing-based company has seen its smartphone shipments in China drop by 33% on an annual basis in the third quarter while those of Huawei expanded 66% year on year for the same time period.
- Overall smartphone sales in China shrank 3% year on year in Q3.
- Xiaomi has looked to European markets, where Huawei phones are restrained by its blocked access to Android as a result of a US trade ban, to make up for weak sales at home.
- The company’s Q3 smartphone shipments in Europe surged 73% year on year to reach 5.5 million units, though still dwarfed by Huawei’s 11.6 million units sold in the region during the same time period.
Details: The company’s revenue in the third quarter rose to RMB 53.66 billion (around $7.6 billion) from RMB 50.85 billion the same period a year earlier, a 5.5% year-on-year increase.
- It generated RMB 3.5 billion in profit during the quarter, a 20.3% increase compared with the same period last year.
- Revenue from smartphones, which accounted for most of Xiaomi’s total revenue, fell 8% year on year to RMB 32.3 billion in the quarter.
- Xiaomi chief finance officer Shou Zi Chew attributed the smartphone sales drop to the bleak smartphone market where wireless operators are upgrading their networks from the current 4G to 5G at an earnings call with analysts on Wednesday.
“We are in a transitional period from 4G to 5G and the smartphone market is under great pressure… We are very confident about the 5G era because we are good at bringing new technologies to consumers” (our translation).
—Shou Zi Chew, at the earnings call on Wednesday
Context: Xiaomi in September launched the country’s cheapest 5G-compatible smartphone, the Mi 9 Pro, at a starting price of RMB 3,699.
- Company chairman Lei Jun announced last week that Xiaomi is building a “smart plant” in Beijing to manufacture its flagship handsets.
- In a further global push, Xiaomi is planning to enter the Japanese smartphone market next year, according to Nikkei.