Xiaomi Corporation (“Xiaomi” or the “Group”; stock code:1810), a consumer electronics and smart manufacturing company with smartphones and smart hardware connected by an Internet of Things (IoT) platform at its core, announced its unaudited consolidated results for the three and six months ended June 30, 2022. During the reporting period, Xiaomi registered revenue of RMB70.2 billion. Adjusted net profit reached RMB2.1 billion, which included RMB611 million of expenses related to smart EV and other new initiatives.
In the second quarter of 2022, global macroeconomic turbulence and the resurgence of COVID-19 continued to impact overall market demand for smartphones, and global smartphone industry shipments declined 8.9% year-over-year and 7.7% quarter-over-quarter, according to Canalys. Against the backdrop, the Group remained focused on its preordained strategies of seeking to strengthen the fundamentals of smartphone business, further pursue development of Xiaomi’s technology ecosystem and expand foothold in global markets demonstrating strong levels of operational resilience.
Global strategy bears fruits as smartphone shipments grow for two consecutive quarters
In the first half of 2022, global smartphone shipments dropped 8.9% year-over-year and 7.7% quarter-over-quarter. Despite the challenge, Xiaomi remained committed to its core strategies in pursuit of long-term and sustainable development. As Xiaomi continues to advance its dual-brand strategy, fundamentals of its smartphone business have shown tremendous resilience.
In the second quarter of 2022, Xiaomi’s smartphone revenue reached RMB42.3 billion with global smartphone shipments reached 39.1 million units, an increase of 1.5% quarter-over-quarter. According to Canalys, Xiaomi’s global smartphone shipments ranked No. 3 in the second quarter with market share of 13.8%, and its market share has increased for two consecutive quarters.
In the meantime, Xiaomi’s international brand strength continues to solidify as it progressively expands its foothold in global markets. In the second quarter of 2022, Xiaomi’s revenue from overseas markets reached RMB34 billion, accounting for 48.4% of total revenue.
Benefiting from Xiaomi’s mature business model and localization experience, the Group’s market share in Europe, Latin America, Southeast Asia, Middle East and Africa all increased quarter-over-quarter. According to Canalys, in the second quarter of 2022, Xiaomi’s smartphone shipments ranked top 3 in 55 countries and regions and among the top five in 67 countries and regions. In the second quarter of 2022, Xiaomi’s smartphone shipments ranked No. 2 in Europe with 21.7% market share, ranked No. 3 within Western Europe with market share of 15.8% and ranked No.1 in Spain.
Meanwhile, Xiaomi continues to penetrate the overseas carrier channel. According to Canalys, the Group’s carrier channel market share in Europe increased from 17.0% in the first quarter to 18% in the second quarter of 2022. Xiaomi’s carrier channel market share in Latin America increased from 17.7% to 19.3% in the same period. According to Canalys, Xiaomi smartphone market share through carrier channels ranked top three in 40 overseas markets.
Xiaomi continues to earn global recognition. In August 2022, Xiaomi was named on the Fortune Global 500 list for the fourth consecutive year and ranked 266th, advancing 72 spots from 2021. By harnessing the potential of business expansion through market localization efforts, the development of a global market presence is expected to generate immense growth opportunities for Xiaomi.
Ramping up R&D investment to boost premiumization
Xiaomi has been pursuing technological innovation and quality upgrade, and is committed to strengthening its independent R&D capabilities and enhancing its core competitiveness. In the second quarter of 2022, its research and development expenses reached RMB3.8 billion, an increase of 22.8% year-over-year. At the latest Xiaomi product launch event, Lei Jun, founder, chairman and CEO of Xiaomi Group, revealed that Xiaomi’s R&D investment has grown at a CAGR of 39.7% since 2017 and is expected to reach RMB17 billion in 2022 and RMB100 billion in the next five years.
During the reporting period, Xiaomi not only launched its proprietary Surge G1 battery management chip to optimize the performance of smartphone products’ battery life but also continued to boost its premiumization strategy with significant breakthroughs in imaging technology and smartphone form factor.
In May 2022, Xiaomi announced its long-term strategic partnership in imaging technology with Leica, another milestone in Xiaomi’s premiumization development. In July 2022, Xiaomi announced its first model with Leica, Xiaomi 12S Ultra. It features a Leica Summicron lenses and Sony IMX989 one-inch image sensor, along with the Leica Authentic Look and the Leica Vibrant Look imaging profiles, delivering a highly texturized smartphone photography experience. With the release of Xiaomi 12S series, the third generation of Xiaomi high-end “performance-first, experience-first” has fully emerged. According to the JD platform, Xiaomi 12S series has been well received by the market with more than 98% of reviews positive thus far.
On August 11, Xiaomi’s second-generation foldable flagship smartphone, Xiaomi MIX Fold 2, was unveiled and it pushes the boundaries of the premium market once again. The product features the self-developed Micro Waterdrop Hinge and flexible ultra-thin glass to provide a revolutionary ultra-slim design and pleasant in-hand experience. Xiaomi MIX Fold 2 is equipped with Eco2 OLED flexible display, which greatly increases light transmittance while reducing power consumption. It is also equipped with the Snapdragon 8+ Gen 1 Mobile Platform processor, Leica Summicron lenses and MIUI Fold 13, which is designed specifically for foldable smartphones. Xiaomi MIX Fold 2 offers outstanding performance and exceptional user experience in terms of display, imaging and software, and has achieved strong sales since launch.
In the second quarter, according to third-party data, Xiaomi’s smartphone market share in the RMB3,000 to RMB4,000 price segment in mainland China increased 3.5 percentage points year-over-year to 18.2%, and in the RMB4,000 to RMB5,000 price segment, its market share rose 2.0 percentage points year-over-year to 15.5%. The development of Xiaomi’s premiumization strategy has become a driving force contributing to its solid development.
In addition, Xiaomi is relentlessly exploring the future and focusing on sharing the long-term value of technology. At present, Xiaomi adopts the technology deployment strategy of self-developed full stack approach to autonomous driving technology. The Group plans to invest RMB3.3 billion in autonomous driving research and development in the first phase during which it will create a fleet of 140 test vehicles to further drive technological breakthroughs. The robotics laboratory that established in 2021 has made groundbreaking achievements. On 11 August, Xiaomi launched its self-developed, full-size humanoid bionic robot CyberOne, which supports bipedal-motion posture balancing through mechanical joint motors and full-body control algorithms. Furthermore, it is capable of detecting human emotion and creating three-dimensional virtual reconstructions of the real world through self-developed audio and vision modules and algorithms. These series of self-developed high-tech products fully demonstrate Xiaomi’s technological leadership and promote the evolution and enhancement of Xiaomi’s premiumization capabilities.
Shaping new “Xiaomi Technological Ecosystem” to empower smart living era
Driven by innovation, Xiaomi has further advanced its “Smartphone x AIoT” strategy to empower a smart living era. The company is building an ever-expanding technology ecosphere spanning smartphones, wearable devices, smart home, smart manufacturing, smart EVs and bionic robots, to better connect people to the world around them and improve their lives. In tandem with the development, the Group launched a series of new products, including Mijia Dual-Drum Washer Dryer 15kg, Xiaomi Pad 5 Pro 12.4, Xiaomi Buds 4 Pro, Xiaomi Watch S1 Pro and Mijia Smart Smoke Purifier P1 elevating premium experiences and capabilities.
As of June 30, 2022, the number of connected IoT devices (excluding smartphones, tablets and laptops) on Xiaomi’s AIoT platform reached 526.9 million, up 40.7% year-over-year. The number of users with five or more devices connected to its AIoT platform (excluding smartphones, tablets and laptops) exceeded 10 million for the first time to reach 10.2 million, an increase of 37.0% year-over-year.
Xiaomi continues to enhance interconnectivity across all usage scenarios and expand a diverse smart living product portfolio. In the second quarter of 2022, Xiaomi’s revenue from IoT and lifestyle products amounted to RMB19.8 billion. Although demand for discretionary items in overseas markets was weak in the short term due to the macro-economic factors, many IoT product categories in the domestic market still achieved solid growth.
Global shipments of Xiaomi smart TV reached 2.6 million units, outperforming the overall decline in the global TV market, thanks to the cost advantages brought by the Group’s economies of scale and the lower prices of key components. The gross profit margin of smart TV business increased substantially year-over-year in the second quarter. According to All View Cloud (“AVC”), Xiaomi smart TV shipments ranked No. 1 in mainland China and maintained its top five global ranking in the second quarter of 2022.
Smart large home appliance category (including air conditioners, refrigerators and washing machines) continued to deliver strong growth with revenue increasing over 25% year-over-year to set a record high. Xiaomi’s air conditioner product shipments grew by over 35%. It is worth mentioning that as of July 2022, the company’s air conditioner shipments year-to-date has already exceeded the 2 million units in 2021, while the total tablet shipments exceeded 1.5 million units in the first half of 2022.
Monetization of overseas internet services revenue strengthens underpinned by record-high MIUI MAUs
Despite the challenges posed by macroeconomic headwinds, Xiaomi’s internet services business achieved rapid growth underpinned by sustained growth of user base and stronger content and service operations.
In the second quarter of 2022, Xiaomi’s internet services revenue reached RMB7.0 billion. Overseas internet services revenue achieved a quarterly high of RMB1.7 billion, an increase of 52.1% year-over-year, and accounted for 23.9% of total internet services revenue. Its overseas internet services business not only diversified its monetization capabilities but has also safeguarded its growth resilience amid macroeconomic uncertainties and is expected to further optimize the company’s profitability.
foundation for its long-term development. In June 2022, global MAU of MIUI reached 547.0 million while MAU of MIUI in mainland China reached 140.2 million, both hitting record highs. The Group added 17.8 million MAU of MIUI globally, including 4.6 million MAU in mainland China.
In this quarter, overseas advertising revenue increased over 50% year-over-year, mainly benefiting from the continued expansion of overseas user base, enhanced content and services, as well as deeper collaboration with the company’s global business partners.
Driven by smart TV shipments, Xiaomi’s TV internet user base continued its robust growth momentum in the second quarter. In June 2022, global MAU of Xiaomi’s smart TV (including Xiaomi Box and Xiaomi TV Stick) reached approximately 53 million. Revenue from mainland China TV value-added services increased nearly 25% year-over-year in this quarter due to optimized content operations.
In the second quarter of 2022, Xiaomi’s resilience backed by well-established capabilities has boosted market confidence amid temporary economic volatility and slowing demand. Meanwhile, Xiaomi’s continued strong organic growth momentum enabling the company to navigate short-term volatility and reshape its long-term development.