Xiaomi Updates: Q3 2021

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 Wang Yang 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.