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Xiaomi latest Q3 reveals it’s more than a smartphone vendor

The company has started to benefit from its IoT and lifestyle segment amid sluggish smartphone sales.

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China’s electronics company Xiaomi delivered a better than expected third-quarter thanks to a strong rise in its revenues from the Internet of Things (IoT) and lifestyle segment, up 44% to RMB 15.6 billion (USD 2.2 billion), despite a continuous decline in revenues from its smartphone shipments, down 7.8% year-over-year to RMB 32.3 billion (USD 4.6 billion).

The company reported total revenues of RMB 53.7 billion, up 5.5% year-over-year, and a net profit of RMB 3.5 billion, a 20.3% rise from the same period in 2018. Xiaomi also announced a gross profit margin of 15.3% during the quarter, up from last year’s 12.9%.

Outperforming expectations, though, Xiaomi’s latest report is the company’s slowest-ever growth since July 2018 when the company got listed in Hong Kong. As a comparison, the company reported a 14.8% year-over-year increase in its revenues during the last Q2.

Xiaomi was hurt by China’s downturn in the smartphone market and Huawei’s robust momentum, KrASIA reported. It sold 32.1 million smartphone units during this period, while Huawei sold 67 million smartphones in the same period.

As the world’s No.4 smartphone vendor in terms of shipment volume, Xiaomi’s smartphone segment contributed 60% of the company’s overall revenues in the reported quarter, but the share is going down largely. In 2015, this segment made up 80.4% of the company’s annual revenue.

The company attributed the slowdown to the transition to 5G networks. “We continued to operate prudently during the transition period from 4G to 5G technology in China, maintain healthy cash flows and inventory levels, focus on technological development, in order to strengthen our capabilities to capture the upcoming opportunities upon the widespread adoption of 5G technology,” said Xiaomi in its financial report.

Behind the lines, the Beijing-based firm has started to benefit from its “Smartphone + AIoT” dual-engine strategy, to reduce its reliance on the smartphone business and speed up to build a smart home appliance empire, under its “Mi” and “Mi Home” brand, ranging from televisions, washing machines, standing fans, and fridges, among others.

Xiaomi’s connected IoT devices (excluding smartphones and laptops) reached 213.2 million as of September 30, 2019, a year-over-year growth of 62.0%, while the company reported 291.6 million monthly active users (MAUs) of its office and smart travel platform MIUI.

The company shipped 3.1 million smart TVs in the quarter under review, representing a year-on-year growth of 59.8% and topping mainland China’s market with a share of 16.9%. Along with it, TV internet services continued to grow, driven by paying subscribers and ads.

Overall, the IoT and lifestyle segment accounted for one-third of the company’s total revenues.

Earlier in January, Lei Jun, Xiaomi’s founder and CEO announced the “smartphone + AIoT” strategy with a pledge of RMB 10 billion for implementation, restressing the tech company’s ambition in the industry.

The earnings report also shows that Xiaomi’s global expansion brought RMB 26.1 billion in this quarter, with an annual increase of 17.2%. The company has been the number one cellphone brand in India for nine consecutive quarters, while ranked 4th in terms of smartphone shipments in Western Europe, with a year-over-year growth of 90.9%.

For the forthcoming 5G era, Xiaomi appears to be confident. “We believe that 5G will­­, in the next couple of years, bring new growth opportunities to Chinese smartphones,” the firm’s CFO Zhou Shouzi said at the third-quarter earnings call.

Xiaomi 9 Pro 5G, Xiaomi’s first 5G-enabled gadget at its home market, was launched in September, starting from RMB 3,699 (USD 526), one of the cheapest 5G phones. The company also plans to release at least 10 5G smartphones next year, according to CEO Lei Jun.