Xiaomi’s quarterly revenue fell nearly 10 percent as the company battled a collapsing global smartphone market and weak domestic consumer demand.
Mobile device sales fell 11 percent, leading to declines across all businesses, including smart electronics and internet services. The Beijing-based company reported sales of CNY 70.5 billion (about Rs. 80,900 crore), slightly ahead of estimates. However, for the quarter ended September, it posted a surprise net loss of CNY 1.5 billion (about Rs. 1,711 crore) reflecting a write-down of nearly CNY 3 billion (about Rs. 3,422 crore) on items such as investment losses. Adjusted net income, which excludes special items, beat analyst estimates.
China’s Covid-Zero policy has sowed chaos in the country’s tech industry and supply chains, and weighed on economic activity. At the same time, electronics demand is cooling as buyers react to higher inflation and slowing economic growth. Global smartphone shipments are at their lowest level in years thanks to weak demand, but Xiaomi has managed to gain market share in Europe, executives told reporters on a conference call.
“The challenge in China is Covid, the pandemic situation is still volatile,” President Wang Xiang said. “There is still room for growth in overseas markets,” he added.
Global smartphone sales are expected to fall 2.9 percent next year after a 12.2 percent slump in 2022, Jefferies forecast this month. Xiaomi’s sales will decline this year and next, before recovering slightly in 2024, Jefferies predicts.
That’s partly because the phones sold in recent years have been well built, so consumers rarely need to buy new ones, Jefferies analysts, including Edison Lee and Nick Cheng, said in the Nov. 9 note. And new models add few innovations, they said.
“The structural weakness is worse than expected,” the analysts wrote. The challenges would be “reinforced by a weak economy”.
According to Bloomberg Intelligence, the decline in smartphone sales in China could stretch into 2023, although the fall in sales eased in September. A boost from the launch of the iPhone 14 could be a one-off, and Android’s weakness seems overwhelming in the months that followed. Continued declines in corporate PC shipments suggest post-lockdown business outlook still cautious – Steven Tseng and Sean Chen, BI analysts
Xiaomi reported its first sales decline in the first quarter, followed by a 20 percent sales decline for the June quarter.
Even the world market leaders were not spared. Samsung Electronics, the world’s largest maker of phones, displays and memories, said falling handset sales in China were a drag on its components business. Apple Inc. expects to produce at least 3 million fewer iPhone 14 phones this year than originally expected, people familiar with its plans said, largely due to lower demand for the more affordable versions of the model.
Xiaomi shares have lost half their value over the past year, giving the electronics giant a market cap of about $31 billion. Still, it performs better than some of its domestic phone-making rivals like Oppo and Vivo thanks to its broader international presence and distribution.
Co-founder and chief executive officer Lei Jun has made EVs Xiaomi’s guiding star for future growth, $10 billion (approx. Xiaomi has made strides in this area, Wang said without elaborating).
That project will take years to come to fruition, however, so the company will need a rebound in consumer electronics spending to revive its flagging fortunes. Android phone sales, where Xiaomi is struggling with Samsung in international markets, are unlikely to recover any time soon, especially at home in China.
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