MediaTek’s Q3 2023 Revenue Up 9% QoQ as Inventory Levels Normalize

  • MediaTek witnessed robust sequential growth in Q3 due to customers restocking inventory. 
  • Inventory declined to a healthy level of 90 days during the quarter.  
  • 3nm SoC shipments set to start in H2 2024 
  • Auto pipeline remains the same over $1 billion

MediaTek’s revenue increased 9% QoQ in Q3 2023, highlighting a good quarter, despite a YoY decline. This sequential growth was largely driven by inventory restocking by smartphone OEMs and new 4G and 5G model launches. The demand for wireless and wired connectivity grew sequentially with shipments reaching a quarterly record. Also, the inventory situation has gradually improved, coming down to a steady level of 90 days compared to 115 days in the previous quarter. The company is aiming to launch the 3nm chipset in H2 2023. 

Long-term growth potential in computing, edge AI and Auto segment 

CEO Rick Tsai: “For the future, the increasing computing capabilities, the proliferation of edge AI, and the higher adoption of semiconductor content for automotive will provide strong growth opportunities for MediaTek. For AI, we believe the increasing demand for cloud AI will create a complementary demand for edge AI, and, the more edge AI, the better cloud AI.”

Shivani Parashar’s analyst take: “MediaTek foresees strong growth potential in computing, edge AI, and automotive semiconductors. The company will focus on capabilities to integrate edge AI into SoCs for a wide range of applications, mostly for smartphones and the auto segment. MediaTek has already collaborated with NVIDIA in the automotive sector. The company is well positioned and plans to continue investing in successful segments. The expansion into new markets like AI and ARM computing, by leveraging its technological powers and partnerships with leading foundries, will help the company generate significant revenues in these segments.” 

Customer and channel inventory returned to a normal level 

CEO: “In the last few months, we’ve observed improvements in overall channel inventories, particularly with respect to smartphones. With prudent inventory management, we have reduced our inventory for five consecutive quarters. At the end of Q3 2023, our days of inventory has reached to a healthy level of 90 days. We expect the overall inventory environment to continue to improve in the coming quarters.” 

Parv Sharma’s analyst take: “According to our supply chain checks, Channel level inventory is reducing and by H1 2024, the inventory will be at a normal level. The smartphone OEMs have started restocking the inventory, but still, they remain cautious due to weak consumer demand.” 

5G penetration to increase in 2024 

CFO David Ku: “We still got a few more months to get into 2024, but in general, I think the mix in terms of 4G versus 5G, our view is actually 5G will continue — for our own shipment perspective — 5G probably will increase and 4G will decline in terms of shipment compared to this year, 2024 versus 2023. Because 5G again next year, our view is the overall market will still witness double-digit percentage growth, 4G probably will be flattish to slightly down from the market demand perspective.” 

Shivani Parashar’s analyst take: “We forecast that 5G penetration will increase in double-digit percentage in 2024. In anticipation of a shift from LTE to entry-level 5G smartphones, OEMs are expanding their 5G portfolio across price bands. Intense competition among OEMs, availability of cheaper 5G chipsets and declining prices of 5G devices will contribute to the growth of 5G chipsets. The 4G chipset will decline by low-single-digit percentage in 2024 compared with that in 2023.” 

Result summary 

Transsion Updates Q2 2023

Expansion, Premiumization Drive Transsion’s Record Quarter

September 4, 2023

Transsion Holdings reported revenues of RMB 25.03 billion for the first half of 2023, registering a growth of 8.3% YoY. Net profit grew 27.2% YoY primarily due to better product mix (higher proportion of smartphones as compared to feature phones, with the former accounting for 92% of group revenues) and geographical expansion into higher-value markets.

Q2 2023 was the bright spot as revenues were up 30.7% while net profit grew 83.9%. It was the best quarter in Transsion’s history in both revenue and net profit terms. Gross margins also improved to 24.5%, up 2.4% from a year ago.

Much of Transsion’s turnaround in the key financial metrics above can be attributed to a rebound in macroeconomic fundamentals in the African home market and beyond. Most importantly, inflation rates have come down while food prices have stabilized. Local currencies have also found a stronger footing while several indebted countries across the emerging markets have managed to secure restructuring packages with lenders. As Africa’s most entrenched handset company, thanks to its deep channel penetration and marketing heft, Transsion once again benefitted the most from the upturn.

Transsion’s operating cost in H1 2023 increased 5% YoY as the company is ramping up its operations, particularly in newer markets. It has been aggressive with sales and marketing despite the cyclical downturn, with the spending on these activities increasing 23.6% YoY in H1 2023. R&D spending was also up 20.6% YoY to drive premiumization efforts and develop higher-value products to target the new markets. Costs attributed to management grew 6% YoY, whereas cash flow from operating activities turned positive, primarily due to the reduction in the cost of components and materials, as the company is reducing its inventory and moving towards a leaner operating model.Transsion group smartphone sales by regionAccording to Counterpoint Research, Transsion’s smartphone sales volume grew 3% YoY in the first half of 2023 and 17% YoY in Q2 2023 as demand for TECNO smartphones increased globally, especially in the company’s newer markets. This helped Transsion’s cash flow, as cash on hand increased 61% YoY to reach an all-time high of RMB 12.79 billion. The number of inventory days dropped further to 61, from 86 a year ago. Therefore, the inventory problem that has been troubling the company for the past year has successfully been managed.Average selling prices across different regions for transsion groupMuch of Transsion’s financial successes can be attributed to its continued commitment to entering new markets. In Q2 2023, Africa accounted for 57% of Transsion’s smartphone sales volume, a net drop of 8% from a year ago. Outside Africa, Transsion smartphone sales grew 35% in Q2 2023, most notably in Latin America, Eastern Europe, India and Southeast Asia.

The reason for Transsion’s big increase in profitability is found in its ability to upsell to customers. Average selling prices (ASP) for Transsion smartphones rose by 14% YoY for two years in a row. The MEA region anchored the increase as a big expansion into the Middle East was the main factor. In a bid to replicate its success in Africa, Transsion has targeted the low end when entering new markets, but there is potential for the company to grow beyond the current level.

While Transsion continues to enjoy stable gross margins of around 30% in Africa, the company does face a more competitive landscape in the rest of the world, with gross margins of 15%-20%. However, there is room for improvement as the company continues with its premiumization strategy. In a recent interview, Transsion VP Qi Zhang said the company would be launching a flip foldable in September in another attempt to showcase its technical prowess in the premium segment.

Q3 Revenue Stays Resilient, But Profit Declines Sharply as Costs Balloon

December 13, 2022

Transsion Holdings has reported flat revenue growth for Q3 2022 at 12.9 billion RMB. However, net profit slumped 47.4% YoY due to macroeconomic headwinds, inventory destocking initiatives, competitive pressures, and higher R&D and market expenditure.

Transsion Group Quarterly Revenue and Net Profit Margin

Counterpoint Research - Transsion Group Quarterly Revenue and Net Profit Margin

Transsion’s Q3 smartphone shipments fell 18% YoY, as emerging market demand was hammered by macroeconomic concerns. Inflation rates ticked higher, continuing the pressure on lower-income consumers with high food and energy prices. Local currencies too continued to depreciate against the US dollar.

Despite the big drop in shipment numbers, Transsion’s revenues still achieved positive growth. This was due to a big increase in smartphone selling prices. TECNO and Infinix’s average selling prices (ASPs) rose 26% and 28% YoY respectively. Transsion was able to achieve this due to successful iterations of mainstream devices across TECNO and Infinix, while launching more sophisticated devices that have gathered popularity among aspiring switchers. On the other hand, bringing higher-value products to more mature markets in India and Southeast Asia meant higher contribution from higher-end products to the company’s revenue mix.

 Transsion Group Financials Deep Dive – Sales, R&D and Inventory

Counterpoint Research - Transsion Group Financials Deep Dive - Revenue & Inventory

Counterpoint Research - Transsion Group Financials Deep Dive - Sales & R&D

Three items, in particular, caught our attention in Transsion’s Q3 report:

  • Inventory: Since the COVID-19 lockdowns, Transsion has moved decidedly away from the feature phone business and into the smartphone business. In parallel, inventory levels have also crept up, reaching an all-time high of 80% of quarterly revenues in Q2 2022, which caused discomfort for the management. In Q3, this level was brought down to a more manageable 57%, which put pressure on margins in the quarter but removed a significant uncertainty for future quarters, as the smartphone market is not expected to rebound until well into 2023.
  • Sales cost: Other than the cost of goods sold, sales costs represent the biggest cost item in Transsion’s income statement. In a year when Transsion has reported slowing revenue growth, its sales costs have increased significantly as the company paves the way for an aggressive expansion into other regions. Transsion will be hoping the global smartphone market recovers quickly in 2023, but its investment case could come into doubt if smartphone shipments and market share do not pick up meaningfully in its key markets in the next few quarters.
  • R&D: Transsion is spending heavily on R&D, which is an encouraging sign as the company aspires to move into higher-value smartphone segments and other smart device categories. We expect this trend to continue as the window of opportunity for entry-level devices narrows, considering device costs are expected to creep up, in line with the inflation rate.

Last quarter, we discussed Transsion’s stock options plan for 2022, which is linked to 2024 financial metrics. We expect the company to target 20-25% annual revenue growth rates for both 2023 and 2024. Much of this will depend on the company continuing to move up the smartphone value chain with 5G-capable devices, entry into IoT segments and monetization initiatives for its wide user base. Above all, the recovery of the global economy and smartphone market will be pivotal for Transsion as it gradually becomes more exposed to a wide range of different geographical locations.

Resilient Q2 Performance Driven by Pivot to Value, But Macroeconomic Challenges Remain

August 29, 2022

Transsion Holdings reported a 3.7% YoY increase in its Q2 2022 revenue to RMB 12.1 billion and a 4.5% YoY decline in net profit to RMB 1.04 billion. Considering the macroeconomic headwinds in Transsion’s core markets, the increase in revenue was a bright spot, especially compared with Q1 when the company posted a quarterly revenue drop for the first time since its market debut in September 2019.

Transsion Group Quarterly Revenue

Transsion Group Quarterly Revenue

Transsion’s Q2 smartphone shipments grew 4.1% YoY, an impressive performance despite a shrinking global market, which retreated 9% YoY during the quarter. Geopolitical tensions and high inflation rates have hurt the global smartphone market in general. Further, companies exposed to the low- to mid-end segments and emerging markets are more prone to secondary impacts, such as the strain on customers from high food and energy prices, weaker local currencies against the US dollar, and higher government taxes and levies on ‘non-essential’ imports like consumer electronics.

Transsion Group Q2 2022 Smartphone Shipments Analysis – Growth and Regional Contribution

Transsion’s Q2 smartphone shipments grew 4.1% YoY, an impressive performance despite a shrinking global market, which retreated 9% YoY during the quarter. Geopolitical tensions and high inflation rates have hurt the global smartphone market in general. Further, companies exposed to the low- to mid-end segments and emerging markets are more prone to secondary impacts, such as the strain on customers from high food and energy prices, weaker local currencies against the US dollar, and higher government taxes and levies on ‘non-essential’ imports like consumer electronics. Transsion Group Q2 2022 Smartphone Shipments Analysis - Growth and Regional Contribution
Source: Counterpoint Market Monitor Service

Transsion defied these global trends through resilient performance in its Africa home market and strong growth in other regions, most noticeably in India and Southeast Asia. In both these regions, Transsion is ranked sixth in terms of shipments, helped by the company’s double-digit annual growth rate. Gaining a foothold in these new markets helps the company diversify its revenue sources and also allows the company to move up the pricing curve. According to Counterpoint’s Model Sales Service, Transsion’s smartphone average selling prices (ASP) increased 14% YoY, mainly driven by the success of the company’s TECNO and Infinix brands. The brands’ latest products received good market reception and are edging closer to the $150 mark.

Due to the increased pricing, Transsion’s Q2 normalized gross profit margin reached 22.9%, up 1.4% YoY, to reverse a six-quarter slump. However, the bottom line retreated, mainly due to a significant 40% increase in R&D spending. In our view, this is a positive sign that the company is moving out of its comfort zone of focusing only on pricing competitiveness in its African home market and committing to make more sophisticated products for the higher value markets.

Despite our positive commentary, we also recognize the significant challenges brought on by the macro environment, which is not likely to ease in the near term. In Q2 2022, we observed inventory challenges across handset and component makers, including Transsion. The company’s inventories reached RMB 9.6 billion as at the end of Q2, 27% higher than that in Q4 2021 and 73% more than in Q4 2020. Currently, inventory levels are 19% of the company’s 12-month trailing revenue, which could become an issue if it remains high or if revenue declines in the coming months.

We also note that the company’s recently announced stock options plan for 2022 is linked to its targeted 2024 financial metrics. The plan suggests that the company forecasts revenue and net profit to increase 15% and 32.25% respectively as a baseline case, or 20% and 44% respectively as a bull case by 2024. The targets are compared with the metrics from 2021, which was a strong financial year for Transsion, indicating that the company is extremely bullish about the next couple of years.

Growth Worries in Africa, India See First Revenue Drop Since COVID-19, But Diversification Efforts on Track

June 6, 2022

Transsion Holdings reported Q1 2022 earnings that saw revenues and net profit drop 1.8% and 7.6% YoY respectively. This is Transsion’s first revenue and profit drop since it went public in September 2019. The company’s performance during the quarter was impacted mainly by the stalled growth in its home market Africa and in India, which saw inflationary pressures hitting lower-income consumers significantly. Smartphone sales were down in the region for the first time since the pandemic. However, the company was cushioned by growth in other regions, and margins remained intact despite inventory build-up.

According to Counterpoint Research’s Market Pulse service, cumulative Transsion smartphone shipments reached 18.9 million units in Q1 2022. This was a small increase of 1.6%, the slowest YoY growth rate since the pandemic.

Transsion Group Quarterly Smartphone Sales

Counterpoint Research - Transsion Group Quarterly Smartphone Sales
Source: Counterpoint Market Pulse Service

Looking further under the hood, there are significant regional disparities, however. In Africa, Transsion saw a 7% decline in smartphone sales in Q1 2022, mainly due to the inflationary impact on consumer sentiment. Most large African markets were already running double-digit inflation during 2021, but the Ukraine war had far-reaching consequences as food imports were hampered, affecting lower-income consumers more. Depreciating local currencies also put pressure on the company’s supply chain and margins.

In India, similar macro concerns and impact of the Omicron wave saw the smartphone market record the first Q1 drop ever. Here, Transsion smartphone sales dropped 22%. The market sentiment in India is expected to remain weak in Q2, but sales are likely to see growth due to the low base of Q2 2021 when the market was hit hard by the Delta wave.

On the other hand, Transsion had resilient performances in the Middle East and APAC, which show its diversification efforts are working. In both regions, the company is finding success in penetrating the entry-level segment in key countries like Pakistan and Bangladesh. Transsion’s 79% sales increase in APAC runs counter to the broader market. In the Middle East, the 18% sales increase is likely to extend further in 2022, as the region is expected to be the best-performing smartphone market due to the economic growth driven by oil revenue increases, mainly in Gulf Cooperation Council (GCC) countries.

Transsion Group Smartphone Sales by Region, Q1 2022 vs Q1 2021 (In million units)

Counterpoint Research - Transsion Group Smartphone Sales by Region, Q1 2022 vs Q1 2021 (In million units)
Source: Counterpoint Market Pulse Service

Transsion’s normalized gross profit margins for Q1 2022 decreased to 21.4%, or 2% less than the same period in the previous year. Significant cost pressures persisted due to lingering supply chain disruptions, component shortages and high inventory levels. Rising revenues from other regions are also likely to cap the company’s margins, as it enjoys far higher margins in its home market Africa. However, Transsion now derives 87% of its revenues from the smartphone business, and as feature phone-to-smartphone migration continues for its emerging market customers, we see further room for the company’s revenues and margins to grow.

Transsion signs off 2021 in style: Smartphone market share continues to increase in emerging markets

April 28, 2022

Transsion Holdings reported 2021 results with revenues up 31.8% YoY and net profit up 45.5% YoY. These results were driven mainly by increasing smartphone sales and market share, which widened in the core African market, while achieving breakthroughs in key South Asian countries like Pakistan, Bangladesh and India. IoT and internet services, which accounted for 6.5% of the group’s revenues in 2021, also saw robust triple-digit growth.

According to Counterpoint Research’s Market Monitor service, cumulative Transsion handset shipments reached 184 million units in 2021, an all-time high. Smartphones, in particular, grew 61%.

 Transsion Group Handset Shipment and Revenue Analysis

Counterpoint Research - Transsion Group Handset Shipment and Revenue Analysis

Sources: Counterpoint Market Monitor Service, Transsion Group financial statements

Transsion continued to do well in its home market Africa, where it already dominates with close to 45% share across its three brands. However, Africa accounted for only half of the shipment increases in 2021. In India, Transsion almost doubled its smartphone sales in one year, while the company is already the biggest smartphone OEM in Pakistan. As such, Transsion smartphone sales attributed to Africa decreased from 67% in 2020 to 56% in 2021. A widening geographical footprint, accompanied by an enriched portfolio, can help the company diversify its customer base and increase its technical prowess.

The company also reported surprisingly good revenue growth from other businesses. Revenues not attributed to handsets, which mainly include IoT and internet services, grew 68% YoY to RMB 3.2 billion. Their contribution to group revenues now stands at 6.5%. This is due to new products in the wearables, TWS, notebook and TV categories. But more importantly, Transsion’s ‘Matrix of Internet Products’ became meaningful growth engines. Apps under the Transsion umbrella saw installations increase 240% YoY, with three apps – Phoenix, Boomplay and Scooper (with MAUs of 100 million, 68 million and 27 million respectively) – becoming main gateways to the internet for African users. User and eventually revenue growth from apps will become ever more important factors in Transsion’s future strategy, particularly in Africa, as its handset business will inevitably hit road bumps in the future.

Transsion IoT & Internet Services Analysis
Counterpoint Research - Transsion IoT & Internet Services Analysis

Source: Transsion Group Financial Statements

Transsion’s normalized gross profit margins decreased to 21.3% for the year, after staying above 23% for the first three quarters of 2021. There were significant cost pressures in the second half of the year, especially due to supply chain disruptions and component shortages. We expect these issues to gradually ease in 2022 as the supply and demand dynamics in the semiconductor industry improve, and supply chains become more resilient to shocks. However, foreign exchange fluctuations and inflationary pressures in key markets will be the new destabilizing factors for the company, as risks shift from the supply to the demand side in the wider global handset market.

Transsion handset sales, profit continue to improve despite cost pressures

November 24, 2021

Transsion Holdings reported Q3 2021 results with revenues up 16% YoY and net profit up 33% YoY. These positive results were driven once again by further pivoting to smartphone sales, especially in the core African market. According to Counterpoint Research’s Market Monitor service, cumulative Transsion smartphone shipments surpassed 20 million units for the first time ever, coming in at 23 million. This represents a growth rate of 75% YoY.

 Transsion Group Handset Shipment and Revenue Analysis

Counterpoint Research - Transsion Group Handset Shipment and Revenue Analysis
Sources: Counterpoint Market Monitor Service, Transsion Group financial statements

While feature phone shipment growth moderated in Q3 2021, the bulk of Transsion’s revenue growth was driven by smartphones. Heading into the Q4 holiday shopping season and 2022, we may see Transsion’s smartphone shipments overtake feature phones for the first time.

Over the past couple of years, as Transsion smartphones penetrated more markets, the average selling price (ASP) saw a noticeable increase. While the ASP showed a mixed trend in the second half of 2019, it increased decisively during 2020 and is showing no signs of slowing down in 2021. Looking at Transsion’s brands closely, TECNO, itel and Infinix saw ASP increases of 56%, 43% and 29% respectively over the past 18 months. These point to positive consumer sentiment and changing perception of digital and mobile services. More consumers in emerging markets now recognize that a decent smartphone is an important component of their daily lives.

Transsion Group Smartphone Average Selling Price ($)

Counterpoint Research - Transsion Group Smartphone Average Selling Price ($)
Source: Counterpoint Handset Model Sales Service

Transsion’s normalized gross profit margins increased to 25.3% in Q3, compared to 25% in Q2 and 23% in Q1. The company managed to navigate the ongoing component shortages well and was able to pass upstream cost increases to consumers. Selling, General & Administrative (SG&A) expenses and financing costs dropped as well. Furthermore, ventures outside sub-Saharan Africa, including in higher value markets in Southeast Asia and the Middle East, contributed to higher profit margins. Profitability may increase further as the supply chain situation stabilizes in 2022.

Smartphone Sales and Profitability Double Boost as Company Diversification Efforts Gather Pace

September 30, 2021

Transsion Holdings continued to see strong performance in H1 2021 with revenues and net income growing 65% and 59% YoY respectively, driven primarily by surging handset sales in its home market Africa, as well as successful ventures in other developing countries. According to Counterpoint Research’s Market Monitor service, cumulative Transsion smartphone shipments in H1 2021 reached a record high of 37.3 million, taking the company’s share in the global smartphone market to 5.5% from 3.5% a year ago.

Transsion Brands Quarterly Smartphone Shipments, 2019-2021
Counterpoint Research – Market Monitor Service

Looking at Transsion’s overall product strategy, we can see that it is shifting materially from feature phones to smartphones in response to market changes. In 2019, 33% of the company’s handsets were smartphones, but in the latest quarter this number has gone up to 47%. In the company’s latest earnings release, smartphones account for over 80% of its revenues, a record high.

Transsion Revenue Split by Business Type
Transsion financial report, Counterpoint Research analysis

Commenting on Transsion’s commitment to smartphones, Senior Analyst Yang Wang said, “Transsion is rapidly transforming and upgrading its product portfolio. The move is driven by the accelerating demand for internet-capable phones in its home market Africa, where the COVID-19 pandemic showed the value of the internet to consumers who were forced to stay at home. The region’s internet and mobile money services are also gathering steam along with a significant drop in data costs. While all OEMs stand to benefit from the consumer’s shift, Transsion gains the most as its distribution and pricing strategies are most ready to tap into new consumer clusters, which previously did not consider buying a smartphone.”

Transsion Smartphone Shipment Share by Region
Counterpoint Research – Market Monitor Service

Apart from product transformation, the other significant shift in the Transsion strategy is geographical diversification. Compared to two years ago, Transsion’s share of smartphone shipments in the Middle East and Africa (MEA) region has dropped from 83% to 68%. On the other hand, shipments have increased rapidly in APAC countries such as India, Pakistan, Bangladesh, Indonesia and Thailand. India specifically has been the growth engine for Transsion, with shipments almost reaching 20% of the company’s global total in H2 2020, before the Delta wave halted the progress.

Commenting on Transsion’s moves in India, Senior Analyst Prachir Singh said, “Transsion brands, especially TECNO, have been focusing on a hybrid channel strategy in India, with an increased emphasis on online channels. This was executed with great success as Transsion brands contributed to 7% of the online smartphone market in India in Q2 2021, compared to 2% in Q2 2020. TECNO’s online smartphone shipments grew almost 20x YoY in Q2 2021, while itel increased its online share by launching online exclusive models like the Vision 1 Pro and A47. From a product positioning point of view, Transsion brands have been focusing on providing specs like higher display size, multi-camera capability and bigger battery, which are the top spec preferences for consumers in the sub-$150 segment.”

Going forward, Transsion’s fundamentals are expected to remain solid, as it continues to hold enormous clout in its Africa home market. Smartphone penetration will gradually expand, with new users continuing to be brought into the internet world. On the other hand, Chinese brands such as Xiaomi, OPPO and vivo are strengthening their market penetration efforts in certain African markets to address the medium-range segment (<$200). This price band is above Transsion’s typical playing field, so the newcomers are unlikely to affect its market share in the short term. However, we have seen in recent years Transsion’s effort to produce more premium phones and enter the <$200 price band. Therefore, there may be a time in the future when Transsion competes directly with the likes of Xiaomi, OPPO and vivo.

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Netgear Q2 Gets Premium Push, Inventory Stabilization Seen in Q3

  • Netgear’s Q2 2023 revenue declined 22.3% YoY to $173.4 million.
  • Inventory correction in H1 2023 totaled $66 million.
  • Orbi, Nighthawk, 5G mobile hotspots and Pro AV will drive revenues in Q3 2023.
  • Netgear expects the Q3 2023 revenues to be in the range of $175-$190 million.


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Netgear’s revenue declined 22.3% YoY in Q2 2023 to $173.4 million, coming at the higher end of the guidance primarily due to an increase in orders from the service provider channel. The company experienced an inventory correction worth $29 million in Q2 2023, taking the H1 2023 inventory corrections to $66 million. As the inventory levels begin to stabilize, we expect the inventory spills will be 20% lower in H2 2023 compared to H1 2023.

Premium offerings, Pro AV switches shine amid revenue declines in both segments

  • Connected home and SMB (small and medium business) segments suffered declines of 24% and 21% YoY, respectively, in Q2 2023 primarily due to inventory corrections at channel partners.
  • Gross margin continued to be above 30% in the second quarter as premium product sales grew and freight costs went down.
  • However, the operating margin continued to be in the negative region as inventory correction amounted to over $29 million. It is expected to improve in Q3 with an improved mix of higher-ASP products in the connected home and SMB segments.
  • The retail market is starting to stabilize with consumer demand increasing toward premium networking equipment as the number of Wi-Fi-enabled devices continues to increase. As home networks become more crowded with bandwidth-hungry devices, the demand for Mesh routing devices will increase with time to ease out home networks.

Netgear Revenue by Segment, Q1 2020 - Q2 2023

  • The end consumer devices have become more feature-rich, especially with AI (artificial intelligence) which now requires more bandwidth, low latency and more reliable Wi-Fi connection. This has led to strong consumer demand for premium routers offering such features.
  • The Orbi and Nighthawk series of routers continued to perform well for Netgear along with 5G mobile hotspots and experienced a YoY increase in shipments in Q2 2023.
  • Pro AV-managed switches continued to outperform other end devices in the SMB segment to deliver a growth of more than 40% YoY in Q2 2023. Netgear is significantly committed to building leadership in IP-over-AV switches and continues to invest more to grow this segment.
  • Other SMB products experienced a major drop in sales due to macroeconomic headwinds affecting enterprise spending in the past couple of quarters, delaying the upgrades to newer Wi-Fi technologies.

Netgear Revenue by Region, Q1 2020V- Q2 2023

Revenues from service providers, in APAC and Europe decline significantly

  • Though service provider revenue increased sequentially in Q2 2023 to $25 million, it suffered a decline of 30% YoY. Revenues were at the higher end of the guidance due to an increase in orders from a major service provider.
  • Netgear shipped around 6 million units of wired and wireless networking devices, compared to 2.2 million in the same period last year. It shipped around 426,000 units of all types of routers and gateways.
  • Sales in APAC and Europe declined 20% and 40% YoY, respectively, due to an economic slowdown in these regions, especially Greater China and South Korea.

Paid subscribers to reach 875,000 by year-end, inventory corrections to stabilize

  • Netgear is on the path to achieve a paid subscriber base of 875,000 by the end of 2023 as it touched 800,000 in Q2 2023. Revenue from subscriptions grew 8% YoY in Q2 2023 to end at $10.3 million.
  • With concerns about internet security on the rise, especially with a growing number of smart devices, online internet security software is expected to gain momentum in the second half of this year.

Netgear expects the revenue to be in the range of $175 million to $190 million in Q3 2023, as inventory correction is expected to ease out. However, it will still take two more quarters for Netgear to bring down inventory-carrying levels to less than 10 weeks.

Netgear paid subscibers

Key takeaways

  • Counterpoint expects an increase in shipments for 5G mobile hotspots in H2 2023 as the consumer demand for such products is on the rise. Netgear is expected to launch a couple of Wi-Fi 7 Orbi Mesh routers and quadband Nighthawk routers in Q3 2023.
  • However, Wi-Fi 7 upgrade cycle is expected to begin sometime in mid-2024, as IEEE is yet to announce the schedule of the certification program for Wi-Fi 7. Therefore, Wi-Fi 6/6E is expected to form more than 50% of the market in the next two years.
  • Netgear is expected to open more company-owned premium retail outlets which will help it to provide a better customer experience and a competitive edge in the market.
  • Consumer awareness around online internet security remains low. Netgear can play a part in increasing consumer awareness through its D2C (direct-to-consumer) communication channels.
  • Macroeconomic headwinds have slowed down enterprise spending, thus delaying the Wi-Fi upgrade cycle toward Wi-Fi 6/6E.
  • 5G FWA market has been performing well across most of the regions. With more regions opting to reduce the digital divide through FWA, the market promises to offer further growth and become a challenger to fixed broadband technologies.

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Xiaomi Updates: Q3 2022

Xiaomi Faces Headwinds Globally in Q3 2022

Xiaomi has reported a decline of 9.7% YoY in its Q3 2022 revenue at RMB 70.5 billion (or $9.8 billion). But it stayed largely flat in QoQ terms. The revenue decline was attributed to a slowdown in the company’s three major segments – smartphones, AIoT and internet services.

The smartphone segment suffered the most severe decline among the three, with revenue down 11.1% YoY. Based on Counterpoint’s Market Monitor Service, Xiaomi’s shipments were down 8.8% YoY in Q3 2022 with a global market share of 13.4%. The decline in shipments was also accompanied by a decrease in the average selling price (ASP). Xiaomi’s smartphone ASP declined 2.2% QoQ from RMB 1,081.7 (or $ 151) per unit in Q2 to RMB 1,058.2 per unit (or $148) in Q3 due to promotional activities in overseas markets to clear out inventory, offsetting the increase in ASP in China’s market.

The smartphone market continues to face headwinds both in China and globally. In Xiaomi’s home market, ongoing COVID-19 restrictions on mobility and weak economic environment have led to sluggish smartphone sales throughout 2022, which is expected to register a double-digit YoY decline, according to Counterpoint’s estimates. The frequent lockdowns across the country are impacting Xiaomi’s strategy to grow its offline channels, which is seen as a key weakness of the company when compared to OPPO and vivo. Coupled with fierce competition from local players OPPO, vivo and HONOR, as well as Apple’s latest series, Xiaomi’s market position dropped one rank to reach fifth in Q3 2022.

Commenting on Xiaomi’s overseas smartphone business in Q3 2022, Research Analyst Mengmeng Zhang said, “Overseas shipments accounted for more than 75% of Xiaomi’s total shipments. The sluggish macro environment, inflation and foreign exchange fluctuations have also taken a toll on Xiaomi’s sales in the overseas market. On the bright side, we see that Xiaomi is continuously growing its market share in Europe, Latin America and Middle East.”

Xiaomi’s inventory level in China has normalized after the mid-year ‘618’ shopping festival in Q2. However, to clear its inventory for the global market, the company will have to wait till at least Q4, when festive season promotions are launched.

Xiaomi continues to invest heavily in R&D, with the company’s R&D personnel accounting for 48% of its total employees. Xiaomi’s R&D expenditure also grew 25.7% YoY to RMB 4.1 billion (or $0.57 billion) in Q3. More than RMB 829 million (or $116 million) went to new businesses including EV. Xiaomi’s EV business is still in the early stages of development. It is unclear at the moment whether the company will emerge as a leading player in China’s competitive auto market.

Xiaomi’s IoT and lifestyle products segment saw a 9% YoY decline and 4% QoQ decline in Q3. The slowdown in this segment is largely due to weak consumer sentiment. Commenting on the performance of this segment, Senior Analyst Ivan Lam said, “The IoT and lifestyle products remain an important segment for Xiaomi, accounting for 27% of its revenue during the quarter. Despite the segment’s slowing growth, Xiaomi made strong progress in the smart large appliances, such as air conditioners, refrigerators and washing machines, with revenue growing 70% YoY. Smart large appliances are necessities that can better withstand economic downturns. We expect the innovative features of Xiaomi’s smart large appliances to continue to drive demand, especially among younger customers, and become a larger contributor to the IoT and lifestyle products segment.”

Internet services revenue was also muted, declining 3.7% YoY while growing 1.4% QoQ. The segment was particularly hurt by slower China advertisement demand despite growth in overseas markets. Research Analyst Archie Zhang said, “Although the monthly active users of MIUI have reached record highs both globally and in China, monetizing the traffic is challenging during the difficult macro environment and will likely carry through to 2023.”

Xiaomi Q2 2022 Update

Global Smartphone Market Downturn Impacts Xiaomi Numbers

August 23, 2022

Xiaomi’s latest financial numbers fully demonstrate the impact of the global smartphone market downturn in Q2 2022. The company’s revenue dropped 20.1% YoY to RMB 70.2 billion (or $10.3 billion) during the quarter. Most of this decline came from the company’s smartphone unit, which dropped 28.5% to RMB 42.3 billion ($6.2 billion). According to Counterpoint’s Market Monitor Service, Xiaomi’s shipments were down 25% in Q2 2022 with a market share of 13.4%, the third highest after Apple and Samsung.

Xiaomi’s revenue distribution appeared more diversified in Q2 2022 than it was in the same period last year as the non-smartphone units recorded fewer declines in Q2 2022.

xiaomi revenue distribution

Commenting on Xiaomi’s smartphone business in Q2 2022, Senior Analyst Ivan Lam said, “In Q2, Xiaomi’s smartphone business was squeezed by Samsung overseas and HONOR in home market China. After the mid-year ‘618’ shopping festival, Xiaomi’s inventory situation in China eased and returned to a normal level. However, inventory issues still haunt Xiaomi in other regional markets as global inflation and the looming macroeconomic recession keep customers from purchasing or replacing smartphones. In China, HONOR’s strong momentum also pressured Xiaomi’s smartphone sales in Q2. Xiaomi’s shipment share ranked fourth in China while HONOR took the top spot. Looking forward, we believe the Chinese smartphone market is bottoming out but not before realizing a double-digit decline in 2022. The global market will contract too. Xiaomi is slowing down expansion offline, which will weaken its ability to take on the competition in China. The headwinds faced by Xiaomi’s main business are far from over.”

Xiaomi Shipment chart

Inventory issues faced by smartphone OEMs, including Xiaomi, have been under the spotlight this year. There have been reports of OEMs slashing production orders, canceling component purchases and adjusting shipment targets for 2022. According to Counterpoint’s analysis of Xiaomi’s financial report, the company’s inventory turnover days edged higher in Q2 2022. But as the inventory level in China has been lowered, we think Xiaomi may embark on relatively aggressive sales promotion campaigns in other regional markets.

Xiaomi continues to invest in the long term. The company’s R&D expenditure grew 22.8% YoY to RMB 3.8 billion ($0.56 billion) in Q2. More than RMB 611 million went to new businesses including EV.

Founder and CEO Lei Jun said Xiaomi’s EV would go into mass production in the first half of 2024. This means the company still needs one-and-a-half years to see its new growth engine start running. Commenting on Xiaomi’s EV ambition, Research Analyst Archie Zhang said, “EV is a brand-new business for Xiaomi. Therefore, its smartphone business needs to generate enough profits to sustain the growing ADAS and digital cockpit R&D expenditure. Xiaomi has a great advantage over car OEMs, especially since it knows what tech-savvy customers are looking for. But our research shows EV customers still prioritize safety over other factors such as in-car entertainment. That is why established car OEMs like BYD and Volkswagen still dominate EV sales in China, according to our data. Xiaomi may need a couple of more years to prove that its EVs are stable and secure to win over a considerable market share.”


Xiaomi Q1 2022 Update

Xiaomi’s 4.6% YoY Revenue Decrease in Q1 2022 Signals Turbulence in Smartphone Segment

May 23, 2022

Xiaomi registered a 4.6% YoY and 14.3% QoQ decline in its Q1 2022 revenue, something which was being expected. The result can be mainly attributed to the decline in its smartphone sales globally. The company’s smartphone business, which is its biggest, recorded an 11.1% YoY decline. Xiaomi’s global smartphone shipment share has been declining through the past three quarters, from the highest point of 16% in Q2 2021 to 12% in Q1 2022, according to the latest Counterpoint Market Monitor data. Shipments have hit their lowest point since Q3 2020.

Xiaomi’s Global Shipments and Market Share, Q1 2020-Q1 2022

With the ongoing shortages of key components such as 4G SoC, COVID-19 resurgence in some regions, and global macroeconomic headwinds, Xiaomi’s smartphone shipments declined 20.6% YoY in Q1 2022 against the global decline of 8.1% and China market decline of 18.1%, according to Counterpoint’s Market Monitor data.

Commenting on Xiaomi’s smartphone sales, Senior Analyst Ivan Lam said, “Q1 is usually a seasonal low point for all OEMs. But Xiaomi’s smartphone sales declined more than the market. Historically, Xiaomi built its base with entry-level and budget mid-end smartphones such as the Redmi 9A/9C and the Redmi Note series. Therefore, the LTE chipset shortage weighed on Xiaomi’s performance in the lower-end segments. However, we can also see the ASP (average selling price) for Xiaomi’s phones increasing to CNY 1,189 (around $176), which may be the only thing to cheer about in its Q1 2022 numbers.”

Xiaomi’s cost of smartphone sales decreased by 8.1%, primarily due to the reduction in sales, partially offset by an increase in average cost of sales due to a higher proportion of mid-range and premium smartphone shipments. Commenting on the sales activities, Lam said,  “Xiaomi had a bumpy ride in its offline channel expansion in China. After spending big amounts along with offline partners, Xiaomi saw no change in its share of offline sales. To make matters worse, Xiaomi now has a high inventory, especially of mid-to-high-end and high-end smartphones. This has pushed Xiaomi to spend more on promotion activities. We observed that its number of inventory turnover days at the end of Q1 2022 was much higher than in Q1 2021. A high inventory is a danger sign for Q2 2022 as COVID-19 lockdowns are on in some major Chinese cities, reducing people’s ability to purchase new smartphones.”

Xiaomi's Global Revenue Mix

Xiaomi’s IoT and lifestyle products segment saw a 6.8% YoY increase and 22.3% QoQ decrease in Q1 2022. The company’s TV product sales in China lead the show for this segment, retaining the No. 1 spot in the home market for 13 quarters now. Commenting on the performance of this segment, Senior Analyst Yang Wang said, “With 26.6% of the total group revenue, IoT and lifestyle products are a major revenue contributor. However, the segment is not making much money compared to the smartphone segment. And the increase in the profit is mainly attributable to the decreased price of key components such as display panels. In wearable products too, Xiaomi has seen disappointing results. Though it is the leading smartphone brand in India, Xiaomi’s TWS and smartwatch models have not been able to enter the top five brands lists. India’s TWS and smartwatch shipments grew 66% and 173% YoY respectively in Q1 2022 but still, Xiaomi was left out. It could have done better in its second-biggest revenue contributor.”

Xiaomi’s internet services business grew to 9.7% of the company’s total revenue in Q1 2022, registering an 8.2% YoY increase and 2.2% QoQ decrease. The QoQ decrease is due to poor smartphone sales. Commenting on Xiaomi’s internet services segment, Research Analyst Archie Zhang said, “Xiaomi’s internet services segment is continuously bringing positive news against the backdrop of Google grabbing a big portion of such revenue in overseas markets. Xiaomi just passed the 500-million installed base mark to join Samsung and Apple, but it needs to take innovative approaches to monetize the traffic from its products sold overseas.”

In its financial statement, Xiaomi had little information to share on its smart electric vehicle project, the R&D spending on which stands at 12.2% of the overall R&D expense. The statement also mentioned an ongoing investigation by India’s government into some allegations against the company.


Xiaomi Q4 2021 Update

Xiaomi Wraps Up 2021 on a Strong Footing, Despite Challenges

March 23, 2022

With a 9.6% sequential increase in total revenue in Q4 2021, Xiaomi has partially recovered from its underwhelming performance in Q3. In terms of segment performance, its smartphone revenues increased 18.4% YoY. IoT and Lifestyle products and Internet services also saw 19.1% and 17.7% YoY increases respectively.

The company’s latest financial data is also in line with Counterpoint’s Market Monitor data, which shows Xiaomi’s smartphone shipments increased 4.7% YoY and 1.4% QoQ in Q4 2021. The slower increase in smartphone shipments growth as compared to revenue growth illustrates that Xiaomi has made fairly good progress upgrading its portfolio and improving its smartphone average selling price (ASP). Correspondingly, Xiaomi’s gross margin from smartphones improved from 8.7% in 2020 to 11.9% in Q4 2021.

Xiaomi’s Global Shipments and Market Share, Q4 2019-Q4 2021

Xiaomi’s Global Shipments and Market Share, Q4 2019-Q4 2021
Source: Counterpoint Market Monitor Data

Commenting on Xiaomi’s smartphone salesSenior Analyst Ivan Lam said, “Counterpoint’s Market Monitor data shows that Xiaomi’s smartphone shipment growth has underperformed the global market total in Q4 2021. Key component shortages, especially in LTE, constrained Xiaomi’s low-end smartphones sales. However, the increase in ASP helped Xiaomi to keep up with revenue growth. The company is moving in the right direction as it has tried to contain the share of entry-level smartphones.”

Xiaomi’s IoT and Lifestyle products segment saw record performance in 2021, with revenue coming in at RMB 25 billion in Q4, up 19% YoY. Commenting on the performance of this segment, Senior Analyst Yang Wang said, “IoT and Lifestyle products are becoming more and more important to leading smartphone OEMs. Those products can be sold into the same channels as smartphones in most regions, and can therefore be boosted by the same marketing halo effect, such as bundled sales, promotions and new product launches. Notably, Xiaomi’s TVs, laptops, tablets, wearables, and home appliances saw good sales, due to Xiaomi’s affordable pricing strategy.”

Last but not least, Xiaomi’s internet services revenue reached a record RMB 7.3 billion in Q4 2021, translating into a growth of 17.7% YoY. This was attributed to the advertising business, as well as a 79.5% YoY growth in overseas markets.

Xiaomi’s Global Revenue Mix and Share, Q4 2018-Q4 2021

Xiaomi Revenue Mix Share Q4 2018-Q42021
Source: Xiaomi financial report, Counterpoint analysis

During the earnings call, Xiaomi disclosed that revenue from the smartphone segment grew 37%, and was still the biggest contributor to the company in 2021 at 63.6%. Smartphones’ cost of sales remained stable at 56.0% in 2021, as compared to 56.5% in 2020. The cost structure has thus improved by pushing up the ASP.

Internet services made 8.6% of total revenue in 2021. Commenting on Xiaomi’s internet services segment, Research Analyst Archie Zhang said, “Xiaomi’s internet services segment has shown decent growth momentum. Notably, overseas services revenues grew 18.8% YoY in 2021. However, Xiaomi faced several challenges, including more stringent regulations around targeted advertising and privacy, and a weak home market due to sluggish performance of the big internet companies in China.”

Xiaomi closed the buy-out of the 50.09% stake of Zimi International Incorporation that it does not already own. By bringing the ‘ecosystem’ company under its control, Xiaomi can boost its offers in accessories such as mobile power banks, wireless chargers, and smart home accessories. Xiaomi also acquired Deepmotion Tech Limited, a company specializing in advanced driver-assistance systems (ADAS) and automated driving applications. Xiaomi announced that the mass production of its smart electric vehicle will officially begin in the first half of 2024.


Xiaomi Q3 2021 Update

Xiaomi’s Growth Pegged Back by Component Shortages

November 24, 2021

Hit by the ongoing global component shortages, Xiaomi’s smartphone revenues nearly came to a halt in Q3 2021, growing just 0.5% YoY and falling 19% QoQ. Therefore, the strong momentum and fast expansion seen in Xiaomi’s smartphone segment after Huawei’s fall ended after a year. Xiaomi’s internet services segment provided a silver lining but its average revenue per user (ARPU) continued to fall.

The company’s latest financial data is also in line with Counterpoint’s Market Monitor data, which shows Xiaomi’s smartphone shipments dropping 4.7% YoY and 15.3% QoQ in Q3 2021. The slower decrease in smartphone revenue growth compared to shipments illustrates that Xiaomi made fair progress in improving its smartphone average selling price (ASP).

Xiaomi’s Global Shipments and Market Share, Q3 2019-Q3 2021

Xiaomi’s Global Shipments and Market Share, Q3 2019-Q3 2021
Source: Counterpoint Market Monitor Data

Commenting on Xiaomi’s smartphone sales, Senior Analyst Ivan Lam said, “Counterpoint’s Market Monitor data shows that Xiaomi’s smartphone ASP increased more than 7% YoY to $180 in Q3 2021 but dropped about 3% QoQ. The increase in ASP helped Xiaomi to keep revenue flat from the figure of Q3 2020. Since Xiaomi aims to double down on its premium product strategy, we can expect its ASP to continue to increase. On the other hand, component shortages will also play out, especially for Xiaomi products, which boast to have ultra-low profit margins.”

Xiaomi did have some good news in Q3 2021. The company’s internet services revenue reached a record RMB7.3 billion, translating into a growth of 27.1% YoY and 4.3% QoQ, fastest among all segments.

Xiaomi's Revenue Breakdown: Q3 2021
Source: Xiaomi financial report, Counterpoint analysis

At an earnings call, Xiaomi disclosed that its overseas services revenue accounted for 19.9% of its whole internet services segment. The share was more than 500 basis points higher from the previous quarter.

Commenting on Xiaomi’s internet services segment, Senior Analyst Yang Wang said, “Xiaomi’s internet services segment has shown a great growth momentum. Especially, the overseas services revenue grew more than 110% YoY in Q3 2021. We believe India will continue to be the key growth region. The revenue from mainland China will face more uncertainties given sluggish advertising growth at major internet companies. Xiaomi can partner with these internet companies, providing them key data for ad personalization. We think this downturn in China advertising will reflect in Xiaomi’s earnings in the coming quarters.”

Moreover, Xiaomi’s ARPU has dropped for five quarters to RMB15.1. This has been due to the difficulty in competing against Google in the global market. Xiaomi still can’t commercialize data as efficiently as it does in China.

Xiaomi Q2 2021 Update

Smartphone Sales Soar as Company Reports Best Quarter on Record

September 8, 2021

Xiaomi saw a record-setting Q2 2021 with revenues growing 64% and net income surging 80% from the same period a year ago. This performance was driven largely by strong smartphone sales, which reached 52.5 million units in Q2, according to Counterpoint Research’s Market Monitor service.

Smartphone sales growth was broad-based for Xiaomi across most regions. The company has focused on emerging markets such as Southeast Asia, Middle East and Africa, and Latin America, where sales grew 99%, 206% and 229% respectively in YoY terms. Even in the more developed European markets, Xiaomi’s sales grew 109% YoY.

Commenting on Xiaomi’s smartphone product strategy, Senior Analyst Ivan Lam said, “Our numbers show the average selling price (ASP) of Xiaomi phones reached the highest ever at $185 in Q2 2021. This is an increase of 7.3% in YoY terms, driven mainly by the performance of premium products such as the Mi 11 series. We expect Xiaomi to double down on premium segments to uplift its brand in home market China, and high ASP markets like Western Europe, where Huawei’s fall has left a vacuum in the premium range.”

Looking at Xiaomi’s revenue growth by business type, the smartphones, services and IoT segments grew 86.8%, 19,1% and 35.9% respectively in YoY terms. The company’s business is now more than ever dependent on its smartphone segment, which accounts for two-thirds of the total revenue.

Commenting on Xiaomi’s services segment performance, Analyst Archie Zhang said, “While Xiaomi’s smartphone business performed extremely well, there still is a lot of potential to tap into its services segment. During a period when smartphone sales almost doubled, services revenue growth lagged. The average revenue per user (ARPU) in Q2 2021 actually dropped 10% to RMB 15.5, suggesting that monetizing user traffic on smartphones in new geographies is not as straightforward.”

Within Xiaomi’s services segment, advertising revenue was up 46.2%, while gaming revenue dropped 10.7% and value-added services (VAS) revenue dropped 10.3%. Gaming and VAS are likely to face further pressure due to online gaming and financial services regulatory controls in China. Therefore, advertising will become crucial to Xiaomi’s services success, and we expect it to beef up collaborations with leading internet companies and expand partnerships abroad.

Despite these challenges, the services segment’s gross profit margin soared to 74.1% compared to 60.3% a year ago. With a revenue contribution of only 8%, the segment contributed to 35% of the company’s gross profit. Given the company’s stated intention to keep smartphone margins low, we expect services to continue to do the heavy weightlifting for Xiaomi’s bottom line in the future.

* Key Southeast Asia countries include Indonesia Thailand Philippines and Vietnam

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Landis+Gyr Posts Robust H1 2022 Results Despite Supply Chain Constraints, FX Headwinds

Landis+Gyr, a leading global provider of integrated energy management solutions, posted H1 2022 net revenue of $728.7 million, a 4% rise from the year-ago period.Counterpoint Research - Landis+Gyr Net Revenue, H1 2018 to H1 2022

H1 2022 Highlights:

  • The company’s H1 2022 bill-to-book ratio was strong, reflecting the continuation of smart metering rollouts across major regions, conversion of backlogs, project deployments, contract wins and strong demand. Landis+Gyr’s revenue and financial performance improved with the help of growth in its residential load management software and services, and meter data management system solutions.
  • The company had a solid order intake of $773.2 million in H1 2022 across its three main regions of operation. However, total backlog for the period rose 7.5% YoY to a record-high of $3,480 million, driven by component shortages and supply chain constraints.
  • Landis+Gyr is set firmly on the innovation track with new technological advances, such as the E360 IoT grid-edge meter, E660 next-generation industrial grid-edge meter, cloud-native data hub connector application, GridFlex control SaaS demand-side management solution, NB-IoT-supported T550 heat and cold meter, and the water portfolio development which is on track for launch in 2023.
  • The company is rapidly growing in the Latin America region with the release of new solutions such as the Magno cabinet meter, Wi-SUN in collaboration with Cisco, Revelo residential meter, G480 NB-IoT ultrasonic gas meter and the Edge intelligence ecosystem.
  • Acquisitions and investments with a strong focus on high-growth opportunities, such as new EV charging infrastructure and flexibility management, will give Landis+Gyr over-proportional growth and make it resilient to recession.
  • Landis+Gyr’s smart infrastructure investments in Australia and New Zealand continue to pioneer smart water solutions to detect customer-side and network leaks and reduce non-revenue water losses. The company is set to roll out its smart water meter in New Zealand in partnership with Watercare as it embarks on its first wave of digital transformation in the country.

Counterpoint Research - Landis+Gyr Revenue by Region, H1 2018 to H1 2022

Regional Key Developments in H1 2022


  • The Americas region delivered net revenue of $391.7 million in H1 2022, up 20.4% YoY, driven by higher contract wins including APS, United Illuminating, Peoples Gas, Tri-County and Meriwether Lewis Electric.
  • The strong revenue growth was also driven by large advanced metering infrastructure rollouts during the period, namely PSE&G NJ, LG&E and AES Ohio.
  • Major wins in Latin America with Equatorial, ENEL and EDP for cabinet meters and Iberdrola for C&I meters also helped boost revenue.

Europe, Middle East & Africa (EMEA):

  • Net revenue from the EMEA region fell 6% YoY in H1 2022 to $248 million driven by the unavailability of critical components. The French and UK markets were hurt by delayed projects and weak currencies during the period.
  • However, smart meter shipments are expected to increase to 4 million units by 2023 due to the SMET2 implementation program, which will replace the SMET1 smart meter.
  • The Fluvius project in Belgium along with the metering rollout in Switzerland will drive high order intake for smart meters through continued public tender activities. Landis+Gyr’s partnership with Enedis in France will be a growth driver for the region.

Asia-Pacific (APAC):

  • Net revenue from the APAC region jumped 23.8% YoY in H1 2022 to $89 million, with the New Zealand and Australian markets being the main drivers. The backlog from this region continues to grow due to strong order intake in Hong Kong, Australia, New Zealand and Southeast Asia (SEA).
  • The company’s initial deployment of the E360 smart meter in Australia as part of the long-term partnership with Yurika, a unit of Energy Queensland, is proving to be beneficial.
  • The advanced metering infrastructure in the SEA region is expected to grow as markets such as Indonesia, Thailand, Malaysia and the Philippines are transitioning away from non-AMI setups. The extended partnership with HK Electric to supply smart meters in Hong Kong is also helping Landis+Gyr increase its footprint in the SEA region.

Key Takeaways:

  • Improvements in computing power are driving digital transformation in the utility sector and Edge intelligence for localized decision-making is becoming more critical as the penetration of distributed energy resources is increasing.
  • Like the rest of the smart meter market, the ongoing supply chain constraints are weighing on Landis+Gyr’s ability to fulfil customer orders. However, we expect the situation to ease in H2 2022. Landis+Gyr has been building up its inventory in anticipation of strong shipments in H2 2022.
  • The inventory build-up will result in negative free cash flow but we expect Landis+Gyr to be well positioned to support utilities and end customers.
  • Landis+Gyr is set to benefit going forward as the strong order intake indicates a favourable market environment and an increased need for more intelligent power grids. This will drive energy efficiency and ensure critical infrastructure stability which will be further amplified by the energy crisis.

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Netgear ends Q3 on promising note, SMB grows 21% YoY

Netgear’s Q3 2022 revenue came in at the high end of its guidance at $249.2 million, with strong growth recorded in the SMB segment. The overall revenue shrank by 14% YoY, due to a decrease in demand for consumer and home products. The constraints on the supply side continue to detract from Netgear’s growth, especially in the premium consumer product segment and SMB device segments. However, it has experienced strong demand for its Orbi Mesh Wi-Fi, 5G hotspot, and latest SMB solutions.

SMB continues to lead growth for Netgear

  • The SMB segment once again exceeded its previous quarter’s revenue for the segment and setting a new all-time quarterly benchmark, growing 21% YoY and ending at $99 million.
  • While most businesses are returning to normal working patterns, the need to upgrade older networking systems is a challenge. Netgear has been one of the first to deploy the latest technology in its enterprise offerings and hence has been experiencing strong demand for its Orbi Pro Mesh Networking solutions and Managed Wi-Fi access points.
  • The Pro AV switches have been performing well in recent quarters, Netgear has emphasized customer support by offering specialized design teams to work with clients to understand requirements.

Netgear Revenue by Segment Q1 2019-Q3 2022, Counterpoint Research

The Connected Home segment continues to struggle, declining 28% YoY

  • Netgear continues to offer a more premium range of products with the launch of the Orbi 850/860 Mesh router and M6 5G hotspot router.
  • The high-end mesh router market has been growing consistently in contrast to the declining overall market and Netgear has been at the forefront in this particular segment with growing demand for Orbi routers.

Service Provider revenue remained stable

  • Revenue from service provider channels was $42 million, similar to Q3 2021. The demand for 5G routers has been increasing as more operators are starting to offer 5G in more regions worldwide. Netgear has introduced M6 and M6 Pro 5G routers with Sub-6 and mmWave capabilities to offer high speeds a small footprint. Netgear has been engaged in signing up more operators across Europe, Oceania, and Asia for its hotspot routers.

Netgear Revenue by Region Q1 2019-Q3 2022, Counterpoint Research

Shipments decline by 29% YoY, and business in all regions declined YoY

  • Netgear shipped around 2.4 million units of wired and wireless networking devices. It shipped around 786,000 units of all types of routers and gateways. Wireless remains the dominant segment, driving the revenues with a 61% share.
  • Regionally, Americas declined by 13.2% YoY, EMEA declined by 21.3% YoY and APAC declined by 7.1% YoY mostly due to weakened demand in the consumer segment and currency fluctuations markets with the strengthening of the dollar against major currencies.

Margins show a sign of improvement but remain below the guidance level

  • The quarter saw better performance from the SMB segment as the supply chain continues to improve allowing fulfilment of pending orders, however it remains below normal levels as further orders pile up.
  • The operating margin improved to a negative -0.9% from -27.5% in Q2 2022 primarily due to improving supply chain and increased demand for the premium routers such as Orbi Mesh Wi-Fi and 5G hotspot routers, all of which have higher margins.
  • To improve the supply, Netgear continues to use air transport to offset delivery delays, but the higher costs hurt margins.

Paid Service Subscribers grow but remain below target

  • Services revenue was up by 14.7% annually in Q3 2022 reaching $8.5 millionNetgear has been experiencing decent demand for its service subscriptions.
  • Netgear is focused on increasing its services revenue by offering a multitude of services for consumers and business users such as Armor, Parental Controls, Meural, Pro Support, and Insight Pro services. Overall, Netgear crossed 22.2 million users with 15.5 million app users.

Netgear to carry momentum into Q4 2022

  • Netgear expects Q4 revenues in the range $235-$250 million as the supply chain will remain constrained in Q4, which would mean Netgear could finish below 2019’s annual revenue. As the brand focuses on reducing retail inventory the guidance level seems apt and it is set to cut orders for lower and mid-range consumer networking devices.
  • It expects the service provider revenue to reach around $50 million amid strong demand for 5G hotspot routers. Due to macroeconomic headwinds, it will continue to operate on lower margins for the next quarter.
  • Netgear has been consistently trying to offer more premium products to the consumer market with the latest Wi-Fi 6E technologies. It has been focusing on Pro AV switches, Orbi Mesh Routers, and Nighthawk 5G hotspot routers.

Key Takeaways:

  • Netgear is looking to pivot its business model with SMB taking the forefront in the coming years, potentially growing to around 50% of its total revenue by next year-end. The focus on premium-end routers is paying dividends in terms of good demand and will likely continue to do so in future.
  • The brand is expected to introduce products with the latest technologies such as Wi-Fi 7 and more products with 5G capabilities. For improving margins, it is focused on higher ASP products and is also offering a unique premium experience to consumers.
  • The average price for networking devices in the consumer market is going up, as more consumers are opting for higher-speed data services and are adding more connected devices in the home. The growing consumer awareness around internet security and threats will lead them to acquire better devices with additional software security.
  • Netgear will benefit from the enterprise segment as more companies will look to upgrade their existing legacy systems to Wi-Fi 6/6E/7. It also tends to push its Netgear subscription services to add more value to its products.

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Rogers Q2 2022: July network outage and inflation acts as a dark cloud over a successful 2nd quarter

Rogers reported an excellent quarter across all segments (wireless, cable, and media) with increased revenue, upgrades and subscribers and a declining churn rate YoY. Although the metrics are mostly positive, the tone of the call was gloomy as it addressed the nationwide network outage that occurred on July 8th. They also addressed the Rogers-Shaw merger and why they pushed the rollout date to the end of 2022. There are also the looming inflationary pressures on consumer spending that will impact the national economy in the second half of the year.

Positive results across all segments

  • Service revenue increased 11% YoY and mobile ARPU had a 6% increase YoY as people are returning to work and travelling. Although equipment revenue was down YoY by 6%, overall revenue was up 7% due to the significant increase to the service revenue.
  • The boost in service revenue is driven by roaming fee revenue that has now increased as travel and immigration begins to settle back to pre-pandemic levels. Return to work has caused a 40% increase in data usage and this is expected to grow in the second half of the year as students return to school in September and immigration continues to pick up.
Rogers Gross additions_Q2 2022
Source: Counterpoint Analysis
Rogers Mobile Subs_Q2 2022
Source: Counterpoint Analysis
  • Rogers has been working to improve their cable sector and they saw the largest quarter for cable that they ever have with 21K net additions to video and 26K additions to retail internet. Rogers has now reached 4.7M homes passed for their cable segment.
  • The Media segment saw the biggest growth this quarter with media adjusted EBITDA reaching $2M CAD. This is a 103% increase YoY and is a result of the Rogers Centre being able to reach full capacity and the supported teams, like the Blue Jays, being able to have a full season with home games.

The impact and next steps to recover after the network outages

According to statements during the call, Rogers has seen an immediate impact on subscriber base in the early days following the outage, caused by a coding error, but churn has seemed to improve daily. Rogers has promised $150M worth of credits that will be automatically applied to customers monthly bills in Q3 to reconcile the loss of network connection these customers experienced. The CAPEX for 2022 has increased from $2.8B CAD to $3.0B CAD to cover the losses and implement preventative measures. Going forward, Rogers has created a plan to instill safeguard to prevent this level of outage again and the plan is as follows:

  1. Rogers uses a common IP core gateway to capitalize on efficiency, the outage highlighted issues with this method so there will be a physical separation of wireless and cable router gateways. This plan will cost $250M over the course of several years. Rogers believes that the Shaw merger will further help reduce the cost and timeline of this project.
  2. Greater partitioning of the network at a more local basis, so if there is an outage in one area that nowhere else besides that area should be impacted.
  3. The internal process in writing, moderating, and executing code will be re-evaluated and updated to help prevent errors like this from occurring.
  4. Failsafe measure for emergency calls, partnering with other carrier to provide a 100% working method to transfer those emergency calls to another network in case of those issues and that will happen within the 60 days mandated by the minister to telecommunication.

Rogers-Shaw merger updates

The expected date of the merger has now been pushed to the end of 2022 from the optimistic goal of the end of Q2 2022. The outage was not the only factor to impact this date change, the competition bureau had appealed the merger due to the lack of evidence that this acquisition of Shaw will have a positive impact on the state of competition in the Canadian wireless market. Rogers focused on Quebecor being the new 4th player in Canada market as they are the ones who are set to purchase Freedom mobile from Shaw once the merger has been finalized. The deal is expected to cost Quebecor $2.85B CAD for Freedom mobile, this purchase will be the launching point for Quebecor to launch their network outside of Quebec and into the western provinces.

Expected inflation impacts

Rogers is optimistic about its outlook for the second half of 2022 despite the inflationary pressures that will be impacting the economy and the possibility of a recession. Historically, enterprises usually see the highest impacts from recession and Rogers has claimed that since they are focused on consumers, negativity will be limited. Rogers has managed to grow their revenue and subscriber base to a point that they will be able to withstand hiccups to consumer spending in the second portion of this year and they will maintain the guidance provided at the end of 2021 for 2022. Rogers remains the top carrier in Canada, as Rogers website and stores covered over 23% of the smartphone sell-through in Q2 as per Counterpoints Canada channel share tracker.

Rogers 2022 guidance

Tesla Q2 2020: Strong Performance, Positive Outlook


  • Tesla ended Q2 2020 with $5.2 billion in automotive revenues, a decline of 3.7% from last year. The performance is impressive considering the closure of its main factory in Fremont for nearly half of the quarter. The company also earned a profit of $104 million during the period.
  • Automotive gross margin increased from 18.9% in Q2 2019 to 25.4% in Q2 2020, driven by 285.5% increase in regulatory credits to $428 million, operational efficiencies and cost reduction.
  • The company announced a new Gigafactory at Austin in Texas to manufacture Cybertruck, Model Y and Model 3 for the US east coast. The plant will also manufacture Tesla Semi. The company also has under-construction plants in Shanghai (for Model Y) and Berlin. Tesla expects all the three plants to be operational in the next 12-18 months.

Tesla managed to earn profits by offsetting some of the costs related to plant shutdowns by furloughing employees and making use of increasing regulatory credits. The company expects regulatory credits to double in 2020 from that in 2019. Increasing regulatory credits will help the company to remain profitable in coming quarters.

Technological Updates

  • During the quarter, the company rolled out a beta version of OTA update to slow the car down to a complete halt in response to traffic lights and stop signals. The update was rolled out only to owners having the recent Hardware 3 package ‘full self-driving’ option. The company realised $48 million in deferred revenues through the above update. In February, the company released an OTA update to activate rear-seat heating for $300. During the quarter, Tesla also enabled interior camera recording and side camera blind spot detection with OTA updates. Tesla aims to earn additional revenue by rolling out OTA updates to unlock features.
  • Tesla plans to launch its insurance solution in a few more states other than California in 2020. The company’s priority is to develop a reliable telematics-based insurance service rather than expanding the services in California to other states.
  • In July 2020, Tesla announced an updated Model S with an EPA tested range of 402 miles. The company continues to increase the range of its batteries through incremental changes in design and technology.

Counterpoint: Tesla Q2 2020 results analysis


  • Decent performance despite the main Ferment plant being closed for nearly half of the quarter indicates growing Tesla sales overseas, especially in China where conditions are coming back to normal after the COVID-19 pandemic. Reduced ASPs of some models helped the company to increase sales, compensating to an extent for the tough market conditions. Increased reliance on online sales could have helped Tesla to maintain its deliveries during the lockdown period.
  • The company reiterated its earlier commitment to produce 500,000 vehicles in 2020, indicating that demand is not a major issue (as with other automakers) for Tesla. In fact, according to the management, demand continues to exceed supply.
  • While the situation still remains fluid with the possibility of a second wave of COVID-19 cases, considering Tesla’s strong performance in Q2 2020, we revise our earlier view of declining Tesla sales in 2020.

Latin America and Asia Drives Growth for Spotify in Q1 2020

Spotify met its business expectation on all major parameters despite the COVID-19 outbreak. Both the MAUs and premium subscribers grew 31% YoY to reach 286 million and 130 million respectively. This is driven by strong regional performances in Latin America and Asia Pacific. MAUs grew 36% YoY in Latin America while it grew 65% YoY in the Rest of the World (the Asia Pacific and Middle East Africa ) due to the good performance of Mexico, Brazil, and India.


Spotify MAUs and subscribers (in Millions) Q1 2018 - Q1 2020

Impact of COVID-19

The only metric which did not perform in line with the guidance is ad-supported revenues. This is because the pandemic has curtailed many advertisers budgets and have withdrawn ads from the platform. However, this revenue accounts for only 10% of Spotify’s overall revenue so this is not making a big dent in Spotify’s revenues. On the other hand, premium revenue grew 23% YoY and 4% sequentially in Q1 2019. Interestingly, this indicates that the growth in premium subscribers is not just because of free trials given by the company, but that people are willingly paying to subscribe to the service.

Amid the COVID-19 outbreak, on the global level, there is hardly any impact on paid subscribers and MAUs. In fact, both new and reactivated MAUs grew during lockdown periods in markets including North America, Latin America, and Asia Pacific, etc. Notably, for the quarterly average, the ratio of daily active users (DAUs) to monthly active users (MAUs) was higher than Q1 2019.

Beginning late February, Spotify saw the negative effects of the outbreak as there was a notable decline in DAUs and consumption in highly affected Spain and Italy. However, the market has started to rebound in these markets over the last week of March.

As people continue to stay at home, the usage in cars, wearables, and web platforms has dropped, however this gap is filled with increased traction on smart TVs and gaming consoles which is up by over 50%.

There is a shift in pattern from listening while commuting to listening at home. Podcasts related to wellness and meditation have seen an uptick. The freemium model of Spotify has turned out to be successful in the pandemic time compared to the premium model of Apple Music and Amazon Music. Apple is well aware of this fact and this is one of the reasons it has given 6 months free trials to people in 52 new markets that it recently entered.

Podcast in focus

Spotify is moving from a music first to an audio first company, as podcasts have been gaining user engagement for over a year now. The company has clear plans to keep investing in podcasts with an aim to ace the exclusive content category. It acquired The Ringer in Q1 2020 giving it a total of four studio operations.


Entering India has been a good move for Spotify. There is still a lot of scope for it to shine in the Indian market due to cheap 4G data and around half a billion smartphones capable of installing the app. Also in 2020, Spotify will focus on increasing its share in other countries. In the webcast, Spotify made it clear that it sees Russia and South Korea as having good potential. There it will be competing with regional giants like Yandex Music in Russia and Melon in South Korea.

BONUS PODCAST: Music Streaming Services Entering a Golden Era

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