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Xiaomi doubles down on its efforts to gain a higher share in domestic market

Nov 27, 2018 by Yun Nie
Xiaomi doubles down on its efforts to gain a higher share in domestic market

Chinese smartphone maker Xiaomi (小米) entered a strategic partnership with smartphone and beautification apps brand Meitu (美图) on 19 November.

Meitu will hand over the reins of the brand including its technologies and hardware to Xiaomi, allowing the phone maker to effectively dictate Meitu’s hardware business for the next 30 years. Going forward, Meitu will focus its attention on image-related algorithms and technologies while Xiaomi will take care of the research, design, development, production, sales and marketing fronts.

The partnership came on the heels of Xiaomi’s third-quarter earnings report. According to the report, Xiaomi’s shipments for mainland China dropped by 11% year-on-year.

Through the alliance, Xiaomi is looking to steady the shipment decline and find a place in the high-end smartphone market in China. Meitu primarily targets female users in tier 1, 2 cities, while Xiaomi has predominantly male users. The two companies could not only complement each other in production chain, but also leverage their resources to cover more consumers.

Despite the shipment decrease, Xiaomi posted strong profits in Q3. The Chinese phone maker ended the September quarter with CNY 2.48 billion (USD 357 million) net profit, a big leap from CNY 11 billion (USD 1.58 billion) loss in the same period a year earlier.

Xiaomi’s total revenue in Q3 2018 surged 49.1% year-on-year to CNY 50.85 billion (USD 7.3 billion), but the operating profit fell by 38.4% to CNY 3.6 billion (USD 518 million). The mixed outcomes came in the wake of a slowdown in smartphone sales in both China and overseas, commented The Economic Times.

Growth across all business segments

1. Smartphones

Revenue from Xiaomi smartphones went up by 36.1% year-on-year to CNY 35 billion (USD 5.04 billion) in Q3 2018. The smartphone sales volume and the average selling price (ASP) were the main drivers of the income, according to Chinese news platform Yahoo (雅虎). As of October 26, 2018, the Chinese phone maker crossed the 100 million units shipment- two months ahead of schedule.

2. IoT and lifestyle products

In the third-quarter of 2018, IoT (The Internet of Things) and lifestyle products recorded CNY 10.8 billion (USD 1.56 billion) in revenue- the fastest year-on-year rise at 89.8%. Yahoo said the income primarily came from the robust sales of smart TVs and laptops.

3. Internet services

Xiaomi’s internet services revenue climbed by 85.5% year-on-year to CNY 4.7 billion (USD 676.8 million) in Q3 2018. Advertising revenue soared by 109.8% year-on-year to CNY 3.2 billion (USD 460.8 million), and the Internet value-added services rose by 49.7% year-on-year to CNY 1.5 billion (USD 216 million). According to Yahoo’s report, revenue growth in this segment is prompted by the continuous optimisation of Xiaomi’s algorithm and AI technology, the increase in user engagement and high pre-installation income.

Surge of international revenue

Over 43.9% of Xiaomi’s total revenue in Q3 2018 came from global markets.

The international revenue saw a 112.7% year-on-year growth to CNY 22.3 billion (USD 3.2 billion) in the third-quarter of 2018. Mainland China revenue saw an uptick of 20.9% year-on-year to CNY 28.5 billion (USD 4.1 billion).

Source: 36Kr.com
Source: 36Kr.com

Xiaomi’s shipments in the third quarter of 2018 accounted for 59.2% of the global smartphone shipments during the period. The firm made it to the top five in the smartphone markets of 30 countries in terms of the number of shipments for four successive quarters.

Source: 36Kr.com
Source: 36Kr.com

Xiaomi’s fastest-growing markets are India and Europe. Smartphone shipments to Western Europe rocketed by 386% in Q3 2018, taking Xiaomi to the number four market share position in the region. The shipments to India and Indonesia surged by 31% nd 337% respectively.

Yun Nie

Yun Nie is a New York-based tech reporter. She focuses on India-China financial market, global IT giants and technology-centric market trends. She can be reached at Yunnie@thepassage.cc.

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