On November 20, Xiaomi handed over the first performance answer sheet after announcing the strategy of "people, cars and homes are all ecological".
In the third quarter of 2023, Xiaomi Group’s revenue was 70.9 billion yuan, achieving the first year-on-year growth in six quarters. The adjusted net profit was 6 billion yuan, up 182.9% year-on-year, setting a new high in the past two years.
The business strategy of "paying equal attention to scale and profit" has continued to land, and the high-end has made steady progress, making Xiaomi the first to pick up in the consumer electronics industry. With the announcement of the new strategy of "people, cars and homes are all ecological", Xiaomi is entering a new stage of development.
After six quarters, it returned to growth and the gross profit margin reached a new high.
The operating performance of Xiaomi in the third quarter continued the momentum of continuous recovery since 2023.
In terms of revenue, Xiaomi’s revenue in the third quarter was 70.9 billion yuan, a slight increase of 0.6% year-on-year and 5.3% quarter-on-quarter, and it resumed growth for the first time in six quarters. In terms of profitability, the adjusted net profit in the third quarter reached 6 billion yuan, up 182.9% year-on-year, and the gross profit margin reached 22.7%, which increased for four consecutive quarters and reached a new high.
The business strategy of "paying equal attention to scale and profit" put forward by Xiaomi at the beginning of the year has been further implemented. In addition to the Group’s record high gross profit margin, the gross profit margin of all business segments has also maintained growth. Among them, the gross profit margin of smartphone business reached 16.6%, up 7.7 percentage points year-on-year, the gross profit margin of IoT and consumer products business reached 17.8%, up 4.3 percentage points year-on-year, and the gross profit margin of Internet business reached 74.4%, up 2.3 percentage points year-on-year.
While improving profitability, Xiaomi’s shipments and user scale have also grown steadily.
On the mobile phone side, with the slowdown in the global smartphone market, Xiaomi took the lead in picking up. According to market research firm Canalys, the shipment of millet in the third quarter of 2023 increased by 2% year-on-year, and its market share was the same as that of the same period last year. In Chinese mainland, Europe, Latin America, Africa, the Middle East and other major markets, the market share of Xiaomi smartphones has increased.
In terms of household appliances and IoT products, the market size of Xiaomi has also steadily increased. According to data from Aowei Cloud, Xiaomi TV ranked first in Chinese mainland in the third quarter, and refrigerator shipments also increased by 95%. Canalys data shows that in the third quarter, the shipment of millet flat products increased by 120% year-on-year, and entered the top five in the world for the first time.
The extensive layout of the global market has enabled the scale of Xiaomi’s Internet business to continue to grow. In the third quarter, the number of monthly active users of MIUI worldwide reached 623 million, up 10.5% year-on-year, and the income from Internet business reached 7.8 billion yuan, a record high, up 9.7% year-on-year. In particular, Xiaomi’s overseas Internet business income reached 2.3 billion yuan, a year-on-year increase of 35.8%, and its share in Internet business income increased to 30%.
The high-end capability has stabilized, and the sales volume of Xiaomi 14 series has reached a record.
The recovery of performance and the improvement of profitability are closely related to the progress made in Xiaomi’s high-end strategy.
One week before the financial report was released, Xiaomi announced in the official Weibo that the omni-channel payment amount of "double 11" Xiaomi reached a new high of 22.4 billion in 2023. Goldman Sachs pointed out in a research report that Xiaomi Double 11GMV increased by 32% year-on-year, thanks to the strong performance of Xiaomi 14 series, comprehensive product portfolio and rising average selling price.
As the latest high-end model of Xiaomi, the performance of Xiaomi 14 series is really surprising. During the period of double 11, Xiaomi 14 ranked first among domestic mobile phone brands in the price range of 4,000-6,000 yuan in JD.COM and Pinduoduo, and also took the lead in domestic mobile phone sales in Tmall and Tik Tok. Information from the supply chain shows that since the first sale, the sales volume of Xiaomi 14 series has reached 1,447,400 units within 10 days, setting a sales record for Xiaomi’s high-end flagship.
Since the launch of Xiaomi 12S series in July 2022, Xiaomi’s performance in the high-end market has become more and more stable.
In terms of word-of-mouth, six series of high-end models, such as Xiaomi 12S Ultra, Xiaomi MIX Fold2, Xiaomi 13 Series, Xiaomi 13Ultra, Xiaomi MIX Fold3 and Xiaomi 14 Series, all achieved a favorable rating of over 99% on the JD.COM platform in the first month of release. In terms of sales volume, third-party data show that in the second quarter of 2023, the proportion of Xiaomi’s shipments in the smart phone market of 3,000 yuan and above in Chinese mainland increased to 20.1%, which increased year-on-year for four consecutive quarters. The market share in the price segment of 4,000-6,000 yuan increased by 6.2 percentage points year-on-year to 12.7%, and the smartphone ASP in Chinese mainland increased by over 24% year-on-year.
While the high-end market continues to break through, Xiaomi’s R&D and innovation capabilities continue to improve. Taking Xiaomi 14 series as an example, the core components such as image sensors and screens are all equipped with products independently developed by Xiaomi and jointly developed with domestic supply chains, and the parameters and experience have reached or even exceeded the iPhone15Pro.
For example, the "Light Hunter 900" image sensor, which debuted for the first time, has a specification of 1/1.3 inch. From the actual performance, the light input of Xiaomi 14 is 20% higher than that of iPhone 15 Pro, and Xiaomi 14 Pro is 52% higher. On the screen side, the C8 material jointly developed by Xiaomi and Huaxing Optoelectronics has achieved the highest peak brightness of 3000nit in the industry. On Xiaomi 14Pro, Xiaomi also adopted the first full-depth micro-curved screen, which realized the continuous same bending radius at four sides and four corners, making the curved screen visually close to the straight screen.
R&D and innovation have created a better user experience for high-end products. With the help of Xiaomi 14 series, the share of Xiaomi in China smart phone market reached 21.9% in 2023W44(10.30-11.5), ranking the highest among domestic mobile phones.
The strong market performance of high-end machines has provided more ammunition for research and development. Such a virtuous circle has continuously consolidated the base of Xiaomi’s high-end strategy. In 2022, Xiaomi invested 16.2 billion yuan in R&D, equivalent to 0.53% of the total investment in R&D in China. According to the data disclosed in the financial report, in the third quarter of 2023, Xiaomi’s R&D expenditure was 5 billion yuan, a year-on-year increase of 22%. By September 30, 2023, Xiaomi had 17,563 R&D personnel, accounting for over 53%.
With the development of ecology, the territory of "people, cars and homes are all ecological" is formed.
While the high-end capability has stabilized, the ecological map of Xiaomi has also been expanding. According to the financial report data, as of September 2023, the number of IoT devices (excluding smartphones, tablets and laptops) connected to Xiaomi AIoT platform reached 699 million, up 25.2% year-on-year, and the number of monthly users of Mijia APP increased by 16% year-on-year, reaching 84 million.
With the release of Xiaomi 澎湃 OS in October, Xiaomi’s group strategy was officially upgraded to "the whole ecology of people and cars". Thanks to the long-term deep cultivation in the field of mobile phones and IoT, Xiaomi 澎湃 OS has integrated more than 200 categories, covered more than 95% of life scenes and connected 820 million devices since its birth, becoming the first operating system covering "the whole ecology of people, cars and homes".
Subsequently, Xiaomi announced the comprehensive opening-up plan of IoT eco-partners, and helped smart eco-partners, whole-house industry practitioners and individual developers to quickly join Xiaomi’s IoT ecosystem through Vela open source and the release of Xiaomi’s surging technology brands. At present, there are more than 9,000 Xiaomi IoT partners.
On October 15th, two products of Xiaomi Automobile appeared in the Announcement of Road Motor Vehicle Manufacturers and Products (the 377th batch) issued by the Ministry of Industry and Information Technology. According to the plan, Xiaomi Automobile will be mass-produced in the first half of 2024. This also means that Xiaomi’s "all-ecological" map is infinitely close to the closed loop.
The upgrade from "mobile phone X AIoT" to "the whole ecology of people, cars and homes" means that Xiaomi’s coverage of users’ life scenes is further improved. In Xiaomi’s ecological map, the mobile phone is still the central device and computing center of the whole scene in series, and Xiaomi 澎湃 OS ensures the cross-end connectivity and experience consistency. As Lei Jun, founder, chairman and CEO of Xiaomi Group, said, it will be "the public base of the Internet of Everything".
The capital market responded positively to the new blueprint described by Xiaomi. Since October, Xiaomi’s share price has rebounded strongly, up about 50% from the beginning of the year.
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