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 months ended September 30, 2022 (“2022 Q3”). During the reporting period, Xiaomi registered revenue of RMB70.5 billion. Adjusted net profit reached RMB2.1 billion, which included RMB829 million of expenses related to smart EV and other new initiatives.
Despite ongoing global macroeconomic headwinds, Xiaomi has maintained its business resilience underpinned by its continued execution of corporate strategies, the strengthening of the core “Smartphone x AIoT” strategy, steady development of business operations and the optimization of its monetization capabilities. According to Canalys, the Group maintained its No. 3 global smartphone shipment ranking with a 13.6% market share.
Xiaomi relentlessly invests in research and development. In the third quarter of 2022, Xiaomi’s research and development expenses reached RMB4.1 billion, an increase of 25.7% year-over-year. As of September 2022, its research and development personnel accounted for approximately 48% of total employees.
Smartphone market share remained stable despite headwinds due to Xiaomi’s robust business model
Despite weakening demand in the global smartphone industry, Xiaomi’s smartphone business has shown resilience amid headwinds. According to Canalys, the Group maintained its No. 3 global smartphone shipment ranking with 13.6% market share. Smartphone shipments increased by 2.8% to 40.2 million units in the third quarter of 2022 delivering a quarter-over-quarter increase for the second consecutive quarter.
Building on the combination of a mature business model in overseas markets and a strong local presence, Xiaomi has managed to fortify its leading position in key markets while steadily expanding in emerging markets. According to Canalys, Xiaomi’s market share of smartphone shipments ranked among the top three in 52 countries and regions in the third quarter of 2022 and among the top five in 64 countries and regions. The Group’s smartphone market share in regions including Europe, Latin America and the Middle East all increased year-over-year. According to Canalys, Xiaomi’s smartphone shipments in Europe ranked No. 2 in the third quarter with a 23.3% market share, an increase of 1.8 percentage points year-over-year. It was ranked No. 1 in Spain while it was ranked No. 2 in the Middle East with a 17.6% market share. Meanwhile, it ranked No. 3 in Latin America and Africa with the smartphone market share reaching 15.0% and 6.0% respectively.
Xiaomi remains committed to its globalization strategy and its smartphone user base continues to grow contributing to the strengthening of internet services business performance and business resilience. In September 2022, global monthly active users (“MAU”) of MIUI reached 564 million. In the third quarter of 2022, it added 17.0 million MAU for MIUI globally.
Xiaomi’s overseas internet services also maintained steady growth. Revenue from overseas internet services reached RMB1.7 billion in the third quarter, an increase of 17.2% year-over-year. Its share of total internet services revenue increased to 24.2%, also a quarterly high. Overseas internet services business is also beginning to bear fruit leveraging Xiaomi’s robust business model.
Premium products gained market recognition as Xiaomi strengthened its investment in technological advancement
development (“R&D”) to drive product enhancement. In the third quarter of 2022, R&D expenses of the Group reached RMB4.1 billion, up 25.7% year-over-year. The Group has also continued to expand the size of its R&D team and attracts exceptional technology talent. As of September 2022, R&D personnel accounted for approximately 48% of the Group’s total employees.
Building on Xiaomi’s technological excellence, Xiaomi continues to explore the frontiers of technological innovation. During the quarter, expenses related to smart EV and other new initiatives reached RMB829 million. Xiaomi’s dedication to technological innovation has also been highly recognized by the international market. In October 2022, Boston Consulting Group (BCG) named Xiaomi among the 50 Most Innovative Companies of 2022.
Since the first three quarters of the year, Xiaomi has remained focused on executing its smartphone premiumization strategy and its premium products have gained widespread recognition. Xiaomi has been exploring new mobile imaging technology and unveiled Xiaomi 12S Ultra, its premium flagship imaging smartphone. Its exceptional imaging technology received rave reviews among photography enthusiasts. In addition, Xiaomi MIX Fold 2, an advanced foldable flagship smartphone equipped with a self-developed Micro Waterdrop Hinge, offers a pleasant in-hand feel experience and it continues to attract business professionals.
Xiaomi continued to strengthen its position in the premium smartphone market. In the third quarter of 2022, the average selling price of Xiaomi’s smartphones increased by approximately 9% year-over-year and smartphone shipments in the segment at or above RMB3,000 increased by approximately 14% year-over-year in mainland China. The Group strives to enhance the connectivity between premium products to further exploit its growth potential. During the reporting period, Xiaomi launched its premium TWS earbuds, Xiaomi Buds 4 Pro, and premium smart watch Xiaomi Watch S1 Pro. Among the users of these two new products, over 50% are users of Xiaomi’s premium smartphones based on internal statistical data without duplication removal.
Revenue from smart large home appliance category hits a record growth in excess of 70% showcasing Xiaomi’s elevated user experience
As the world enters the smart living era, Xiaomi continues to expand its leading advantage in interconnectivity. During the quarter, Xiaomi continued to strengthen its “Smartphone x AIoT” strategy. The Group has significantly expanded its user base, strengthened a smart living ecosystem and further enhanced product experience in multiple scenarios.
As of September 30, 2022, the number of connected IoT devices (excluding smartphones, tablets and laptops) on Xiaomi’s AIoT platform reached 558.3 million, up 39.5% year-over-year. The number of users with five or more devices connected to its AIoT platform (excluding smartphones, tablets and laptops) reached 10.9 million. In September 2022, the MAU of its AI Assistant (「小愛同學」) reached 114.6 million, up 9.0% year-over-year and the MAU of Mi Home App reached 72.4 million, an increase of 20.9% year-over-year.
In the third quarter of 2022, Xiaomi’s revenue from IoT and lifestyle products amounted to RMB19.1 billion. Its smart large home appliance category (including air conditioners, refrigerators and washing machines) maintained strong growth momentum with revenue growing over 70% year-over-year, achieving another record high. Within this category, shipments of smart air conditioners exceeded one million units in the third quarter, an increase of over 70% year-over-year. Refrigerator shipments exceeded 340,000 units, an increase of over 150% year-over-year. Eyeing robust market demand, Xiaomi continued to explore the frontiers of technological innovation. In the third quarter of 2022, the Group launched two new IoT products, Mijia Outdoor Power Supply 1000Pro and Mijia Solar Panel 100W, which can satisfy the power demands of outdoor activities, home emergencies and other scenarios.
Solid growth in Internet business with optimized monetization capabilities
As Xiaomi continued to grow its user base and optimize its monetization capabilities, performance of internet services business was robust, despite continued challenging market conditions, especially in mainland China. In the third quarter of 2022, Internet services revenue reached RMB7.1 billion, an increase of 1.4% quarter-over-quarter. As of September 2022, the MAU of MIUI again achieved record highs both globally and in mainland China. Global MAU of MIUI reached 564 million, an increase of 78.1 million users year-over-year. In mainland China, the MAU of MIUI grew for the eighth consecutive quarter and reached 141.4 million, an increase of 14.1 million users year-over-year. Advertising revenue reached RMB4.7 billion, a quarter-over-quarter increase of 2.9%. Gaming revenue again outperformed the market to reach RMB1 billion, an increase of 1.8% year-over-year.
Xiaomi attaches great importance to the diversification of its internet services business, which underscores its immense potential. The Group has continued to enrich large-screen TV product portfolio since the third quarter of 2022. Its global shipments of smart TVs have outperformed an overall decline in the global TV market, driving steady growth in the user base of TV internet services. In September 2022, global MAU of Xiaomi’s smart TV reached a new record high of approximately 54 million.
In the third quarter of 2022, the TV internet business also maintained healthy growth. Benefiting from the increasing user base and optimized content operations, revenue from TV internet services in mainland China accounted for more than 15% of total internet services revenue. The number of TV paid subscribers amounted to 5.5 million.
Despite external headwinds, Xiaomi’s global business remains solid demonstrating its resilient business model. Building on Xiaomi’s technological strength, solid operational capabilities and strong business resilience and through the combination of the Group’s three guiding principles – “never cease to explore and innovate, continue to offer products with strong price-to-performance ratio, and seek to make the coolest products”, Xiaomi is expected to navigate economic cycle fluctuations and shape a new growth cycle.