Xiaomi recorded slowing sales growth in the third quarter as manufacturers around the world contend with a shortage of semiconductors. Also, the company’s profits plunged as it faces a tech crackdown in China, its latest earnings report released on Tuesday showed.
Xiaomi’s smartphone shipments shrank nearly 6% year-over-year to 43.9 million in Q3. Shortly after becoming the world’s largest smartphone manufacturer in Q2, Xiaomi dropped to third place, with Samsung and Apple leading in the number of smartphones shipped globally in Q3, according to Canalys.
The dwindling smartphone shipment is mainly due to a global shortage of key components, the company said in a separate note. However, revenue from smartphones, Xiaomi’s backbone business, remained flat and recorded a slight 0.5% YoY uptick to RMB 47.8 billion (USD 7.5 billion). The increase was mainly driven by Xiaomi’s strong performance overseas, where sales of its premium phones jumped 180% compared with the same period last year.
Wang Xiang, partner and president of Xiaomi, said during the earnings call that the company has faced a “serious supply situation” in the past quarter, and is still struggling because of the shortage. Wang expected the supply crunch to persist through the first half of 2022.
Worldwide smartphone shipments declined 6.7% YoY in Q3 2021, according to a report from market research firm IDC. Nabila Popal, an analyst from IDC, said in the report that all major vendors have reduced their production targets for Q4.
Xiaomi racked up RMB 78.1 billion (USD 12.2 billion) for Q3 revenue, an 8.2% YoY increase. Net profit nosedived 84% YoY to RMB 788.6 million (USD 123.4 million), due to an RMB 3.5 billion (USD 550 million) long-term investments loss. As of the end of Q3, Xiaomi has invested in more than 360 companies, including chipmakers, autonomous driving solutions developers, and IoT consumer product designers.
The company cited a slowing economy and gloomy market sentiment to China’s tech industry for the investment loss, mirroring similar financial hardship that major tech firms have endured in the past quarter. Baidu failed to earn a profit in the most recent quarter due to its investment loss in Kuaishou, the market value of which plunged nearly 80% this year as investors panicked while new regulations for internet platforms were put in place.
Notably, Xiaomi’s internet service—advertisement distribution in mobile games, e-commerce, fintech, and other products—showed robust growth, reaching a record high of RMB 7.3 billion (USD 7.3 billion) in Q3, up 27.1% YoY. Revenue generated from Xiaomi’s IoT and lifestyle products, which include home appliances, smart watches, and more, also reached a record high of RMB 20.9 billion (USD 3.27 billion) during Q3, increasing 15.5% YoY.
This year, Xiaomi founder Lei Jun said that the company will cruise into the electric car industry. It plans to mass-produce its first vehicle in the first half of 2024 and compete with the likes of Tesla, Nio, and Xpeng.