Under various factors such as the global epidemic and the shortage of low-end chips, Xiaomi handed over a less than ideal first-quarter financial report.Data show that in the first quarter of this year, Xiaomi’s total revenue was 73.4 billion yuan, down 4.6% year-on-year; adjusted net profit was 2.9 billion yuan, down 52.9% year-on-year.
Text | Sina Technology Zhang Jun
Editor | Han Dapeng
The decline in revenue is directly related to the decline in revenue from the mobile phone business. In the quarter, the revenue of Xiaomi’s smartphone business decreased by 11.1% to 45.8 billion yuan from 51.5 billion yuan in the same period last year; the decline in profit was mainly related to the change in the fair value of its investments. The 2.1 billion yuan turned into a loss of 3.6 billion yuan in the first quarter of 2022.
Xiaomi President Wang Xiang said in the earnings conference call that Xiaomi was affected by factors such as the continued shortage of core parts and components, the recurrence of the new crown epidemic and the global macroeconomic environment in the first quarter. It is believed that the serious shortage of chips in the second quarter will gradually improve, but it also depends on the development of the epidemic and changes in the international situation.
The first decline in revenue, dragged down by mobile phone business
It is worth noting that this is the first time that Xiaomi’s quarterly revenue has fallen year-on-year since its listing in 2018.
The main reason behind this is the decline in mobile phone shipments and revenue. The financial report shows that in the first quarter of this year, Xiaomi’s smartphone business revenue was 45.8 billion yuan, compared with 51.5 billion yuan in the same period last year, down 11.1% year-on-year; in the first quarter of this year, Xiaomi’s global smartphone market shipments were 38.5 million units, compared with 51.5 billion yuan in the same period last year. 49.4 million units, down 22.1% year-on-year.
The impact of the epidemic and the shortage of chips are the main factors.
Wang Xiang said that the epidemic has had a great impact on production and logistics. The closure of offline stores in Shanghai has affected consumers’ desire to buy. In addition, the shortage of low-end chips has had a great impact on overseas markets such as India and Europe. . “The shortage of 4G chips has a negative impact, and Xiaomi’s models under $150 have a shortage of more than 10 million units,” he said.
In fact, it is not only Xiaomi that faces these challenges, but the entire mobile phone industry.
According to data released by Canalys, in the first quarter of this year, global smartphone shipments were 310 million units, a year-on-year decrease of 11%; from a domestic perspective, data from the Academy of Information and Communications showed that from January to March this year, the overall shipments of mobile phones in the domestic market were A total of 69.346 million units were recorded, a year-on-year decrease of 29.2%.
There is also good news for the mobile phone business. Although shipments declined, Xiaomi’s global smartphone ASP reached 1,188.5 yuan this quarter, a year-on-year increase of 14.1%.
According to the data disclosed by Xiaomi, in the first quarter of this year, driven by the high-end strategy, Xiaomi’s high-end smartphones priced at RMB 3,000 or more in mainland China and 300 euros or more overseas shipped nearly 4 million units worldwide. According to third-party data, in the first quarter of this year, Xiaomi ranked first among Android smartphone manufacturers in terms of smartphone market share in the price range of RMB 4,000 to RMB 6,000 in mainland China.
While revenue from the mobile phone business declined, Xiaomi maintained growth in its IoT and Internet businesses during the quarter, offsetting the impact of the mobile phone business on overall performance.
In the first quarter, Xiaomi’s IoT and consumer product revenue reached 19.48 billion yuan, a year-on-year increase of 6.8%; gross profit margin reached 15.6%, a record high in a single quarter.
In terms of Internet revenue, revenue in the first quarter reached 7.1 billion yuan, an increase of 8.2% year-on-year; among which, overseas Internet business revenue reached 1.6 billion yuan, a year-on-year increase of 71.1%, and the proportion of overall Internet service revenue continued to increase.
Net profit from changes in fair value of investments fell sharply
Compared with the 4.6% year-on-year decline in revenue, Xiaomi’s adjusted net profit fell by 52.9% year-on-year in the quarter, which attracted more attention from the outside world. After the financial report was released, it also appeared on the hot search.
Hu Qimu, chief researcher of Sinosteel Economic Research Institute, said that the main factors affecting Xiaomi’s profits during the period came from the provision for impairment of about 3.6 billion yuan from changes in the fair value of investments and an increase of about 1 billion yuan in sales and promotion expenses for adjusting the business structure.
According to the financial report, Xiaomi’s sales and promotion expenses increased by 26.2% from 4.2 billion yuan in the first quarter of 2021 to 5.3 billion yuan in the first quarter of 2022, mainly due to the increase in publicity and advertising expenses and the increase in overseas logistics unit costs. Publicity and advertising expenses increased by 47.9% from 1.1 billion yuan in the first quarter of 2021 to 1.7 billion yuan in the first quarter of 2022, mainly due to the increase in overseas promotion expenses in the first quarter of 2022.
From the perspective of the specific structure of sales and promotion expenses, the proportion of mobile phone business decreased, and the proportion of IoT and Internet increased.
In terms of changes in the fair value of investments at fair value included in profit or loss, the financial report shows that the first quarter of 2021 will change from a gain of 2.1 billion yuan in the first quarter of 2022 to a loss of 3.6 billion yuan in the first quarter of 2022, mainly due to the listed equity in the first quarter of 2022. Investments incur fair value losses.
The financial report disclosed that Xiaomi’s share of the net investment (loss)/income accounted for by the equity method has changed from a net income of 9 million yuan in the first quarter of 2021 to a net loss of 201 million yuan in the first quarter of 2022, mainly due to the share of It was caused by the losses of certain investee companies such as iQiyi and Kingsoft Cloud.
Overseas revenue accounts for more than 51% of the Indian market is facing challenges
The financial report shows that in the first quarter of this year, Xiaomi’s overseas market revenue was 37.5 billion yuan, accounting for 51.1% of the total revenue. This is also the manifestation of its continuous promotion of globalization strategy.
According to Canalys data, in the first quarter of 2022, in terms of smartphone shipments, Xiaomi ranked the top three in 49 countries and regions and the top five in 68 countries and regions. Among them, the market share of smartphones in Europe is 19.7%, ranking third.
Xiaomi is also promoting the construction of overseas operator channels. In the first quarter of 2022, Xiaomi smartphone shipments in overseas markets (excluding India, Sri Lanka, Nepal and Bangladesh) operator channels exceeded 5.7 million units, an increase of more than 10% year-on-year. %. According to Canalys data, Xiaomi ranks in the top three smartphone shipments among 38 overseas market operator channels.
However, Xiaomi’s globalization strategy is also facing challenges due to changes in the international situation.
In the Indian market, according to foreign media reports, Xiaomi was detained by the Indian government of US$725 million for suspected illegal remittances. Wang Xiang said in the conference call that Xiaomi is actively responding to the Indian government’s investigation into Xiaomi’s tax situation. First of all, Xiaomi is a legal and compliant enterprise. All taxes and expenditures strictly abide by the laws and regulations of the host country. All data has been audited by a third party, so there is no violation of regulations. “While we communicated candidly with relevant Indian authorities, we also appealed through legal channels. At present, the Indian court has lifted the freeze on Xiaomi’s US$725 million assets, and we will continue to maintain candid communication with relevant Indian parties, hoping to reach an agreement. consensus.”
Overall, Xiaomi will still face a complicated situation in the second quarter under the unfavorable start of the first quarter.
Hu Qimu believes that judging from the current situation in Russia and Ukraine and the domestic epidemic, there is no obvious sign of relief in the second quarter, so Xiaomi’s performance in the second quarter is not expected to rebound. However, the impairment pressure on changes in the fair value of Xiaomi’s investments may ease in the second quarter.
Wang Xiang also said on the conference call that the shortage of low-end chips can only be improved in the second half of the second quarter. At the same time, in the second quarter, we must look at inflation and macroeconomic conditions before we can make judgments about the future.