Xiaomi Updates: Q2 2021

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.

Xiaomi Global Smartphone Shipments and Market Share, 2019-2021
Counterpoint Research – 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.”

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

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.

Xiaomi's EV announcement

While Xiaomi’s quarterly report made mention of only the three connectivity-related segments, we expect a fourth segment – electric vehicles (EVs) – to appear next year. The company announced in March a plan to invest $10 billion in a new EV unit in the next 10 years. The new entity, headed by company CEO Lei Jun, has already been registered.

Looking at Xiaomi’s EV progress, in the past six months, the company has been limited to ‘feasibility studies’. However, we think the company will soon reach several key milestones – hiring of key management staff, geographical and target customer analysis, definition of the first product, and securing key production facilities and component supplies. The last one may be the most fluid due to the industry-wide challenges related to global semiconductor shortages, which are likely to remain until next year.

Related Posts