Xiaomi sees slowing sales across all its main offerings, from smartphones, AIoT, and internet service, its third-quarter earnings report shows. The smartphone and electronics maker reported quarterly revenue of RMB 70.5 billion ($9.9 billion), a 9.7% yearly decline.

Why it matters: As electronics makers around the world navigate a market downturn,  Xiaomi, the world’s third-largest phone maker, can provide investors and rivals some clues for the bumpy ride ahead.

Smartphone: Among the three sectors mentioned above, the smartphone business saw the largest yearly drop of 11.1%, shipping 8.8% fewer units in the third quarter, according to Counterpoint Research. Selling prices also saw a 2.2% quarterly decrease, averaging RMB 1,058 per unit.

  • Xiaomi’s strategy of developing a vast network of offline stores in China took a hit due to frequent Covid outbreaks and strict control measures, making it less competitive compared to rivals like Oppo, Vivo, and Honor, the report said.
  • The company’s performance during the Chinese shopping holiday Singles Day was also weaker this year, with an 11.9% yearly sales drop.
  • “Overseas shipments accounted for more than 75% of Xiaomi’s total shipments. The sluggish macro environment, inflation, and foreign exchange fluctuations also took a toll on Xiaomi’s sales in the overseas market. On the bright side, we see that Xiaomi is continuously growing its market share in Europe, Latin America, and the Middle East,” analyst Mengmeng Zhang from Counterpoint Research wrote.

IoT and lifestyle: Xiaomi’s IoT and lifestyle business had a 9% yearly revenue decrease and a 4% quarterly fall due to “weak consumer sentiment.” However, the firm posted a 39.5% increase in connected IoT devices year on year, reaching 558.3 million as of Sept. 30.

  • “Despite the segment’s slowing growth, Xiaomi made strong progress in smart home appliances, such as air conditioners, refrigerators, and washing machines, with yearly revenue growing 70%. Smart home appliances are necessities that can better withstand economic downturns,” Ivan Lam, senior analyst of Counterpoint Research said. Lam expected Xiaomi’s home appliances to continue driving demand, especially among younger customers.

Internet services: Xiaomi’s internet service also performed flat, with a 3.7% yearly decrease but a slight 1.4% increase from the last quarter. 

  • “Although the monthly active users of MIUI have reached record highs both globally and in China, monetizing the traffic is challenging during the difficult macro environment and will likely carry through to 2023,” commented Archie Zhang, an analyst at Counterpoint Research.

Context: Despite market pressure, the firm is committed to investing in research and development: Spending in this sector saw a 25.1% yearly increase in the third quarter of 2022. One successful example of such an investment is the development of the innovative 1-inch camera CMOS, co-worked with Sony. Xiaomi covered half of the $15 billion developing expense, according to Xiaomi CEO Lei Jun’s post on Weibo.

  • The firm’s growth strategy aims to push its products to a more premium market and lift prices of its upcoming Xiaomi 13 phones by 15% to 20%, according to Chinese media outlet The Paper.

Ward Zhou is a tech reporter based in Shanghai. He covers stories about industry of digital content, hardware, and anything geek. Reach him via ward.zhou[a]technode.com or Twitter @zhounanyu.