Source: Wall Street News

On November 20, Xiaomi released its financial report for the third quarter ending September 30. In the face of the overall downturn in the industry, Xiaomi showed impressive results. Revenue met market expectations, and profit clearly exceeded market expectations. After adjusting net profit of 5.99 billion yuan, market expectations were adjusted to 4.65 billion yuan, an increase of 182.9% over the previous year, reaching a new high of 182.9% over the past two years.

From a business perspective, in the third quarter, Xiaomi's smartphone business revenue was RMB 41.6 billion, and the smartphone business gross margin was 16.6%, up 7.7 percentage points from the previous year. This quarter's profit exceeded expectations, mainly due to the fact that the mobile phone business's gross margin exceeded expectations.

Xiaomi management also commented on the current quarter's results at the performance conference after the financial report was released, and answered the market's most concerned questions about Xiaomi.

Lu Weibing, partner and president of Xiaomi Group, said that today's Xiaomi is the Xiaomi in the best condition; it is a Xiaomi that is poised to go and can be expected in the future. In the future, AI must be empowered to help the entire ecosystem and become an intelligent brain. Xiaomi will increase its investment in AI.

We will continue to adhere to the core business strategy of “equal emphasis on scale and profit” and pursue long-term sustained high growth. To become a global leader in hard core technology, Xiaomi must continuously invest in technology. This must be supported by sound finance, and the original development logic of rapid growth will be adjusted to steady progress and precise management.

Lu Weibing said that looking ahead to 2024, the Xiaomi Group will continue to gain strength from 2023. Not only mobile phones, but also wearable tablets, notebooks, home appliances and other businesses will continue to grow, and Xiaomi will be released and listed as scheduled. In the Chinese market, with full focus on overseas markets, Xiaomi is expected to continue to maintain its development momentum, provide users with better products, and create long-term and sustainable high potential growth.

AI technology can improve user experience and shorten switching cycles

The release of Xiaomi 14 has achieved very good results. We have seen that the overall smartphone market is still slightly declining compared to last year, but the impact on overall demand in the high-end mobile phone market is still much smaller than on the overall market.

However, the popularity of Xiaomi 14 shows that our users are still attracted to innovative products. If users are not motivated to buy, it means that our products are not doing a good job, or that they are not appealing enough to users. If a product has innovative points for users, I think Xiaomi still has a chance. I think Xiaomi has many innovative points that the iPhone doesn't have

After the release of Surge OS, the response was very good. Many users bought Xiaomi because of Surge OS, so why are users interested in Surge OS? This is because Xiaomi has built an ecosystem of people and cars. After using our products, users have discovered that not only is the phone itself very smooth and stable, but the medium model is also very strong, and our cross-terminal connectivity has also made a huge improvement this time, so behind these is AI ability, which is a competition of AI abilities in all aspects.

As I think Xiaomi's exploration of hard-core technology and some of the major improvements in product experience brought about by hard-core technology, I believe it will be possible to shorten the user switching cycle. I believe every generation of our high-end phones will introduce a lot of hard core technology. The introduction of this technology is very helpful for us to further occupy the high-end mobile phone market.

Xiaomi adheres firmly to the high-end strategy

I think the high-end strategy is a very, very difficult path. However, when advancing our high-end strategy, we need to emphasize a few points. First, unswervingly promote the high-end of mobile phones, firmly use the high-end of mobile phones to drive the high-end of our other categories, and the other is to firmly promote high-end development on a global scale. I think this is a high-end strategy where our value is very important.

The third point is to promote ecological strategies. I think that the share of offline sales of high-end mobile phones is higher than that of online. We can also see that Xiaomi 14, where the offline share has already exceeded 50%. In the future, as our ecological strategy progresses, the experiences of users related to the Xiaomi ecosystem can only be experienced in the Xiaomi home.

Xiaomi has huge space in overseas markets

For Xiaomi, I think the vast world has a role to play. As far as Xiaomi is concerned, we have huge space in overseas markets. You can take a look at our overseas markets. Excluding the US market, our market share today is only 16% and 17%. I believe Xiaomi's market share in the fourth quarter will be even higher than in the third quarter.

If we take a closer look, we will find that Xiaomi has a market share of 40%-50% in some markets, and our Spanish market share has reached 32%, but we also have some markets, and we probably only have a 5% market share. It is also because in the world, I think we still have a lot of development investment, and I think these are all opportunities for our Xiaomi.

It's not just the mobile phone business; the mobile phone business has great potential. If we look at AIoT again, then I think the AIoT business must accelerate. The AIoT business now accounts for very little share, there are few overseas categories, and prices are high, so there is a lot of room for us to create value in our AIoT business.

First of all, our business needs security, so we must create a platform for security coverage. Second, training should be efficient and enable our ability to expand horizontally throughout the market. Our global landscape continues to deepen.

For example, our performance in India was very good in the third and second quarters under a lot of pressure. You can see that we have expanded very well in all regions of the world, including the Middle East and Southeast Asia.

Cars are indispensable in the Xiaomi ecosystem

Well, on the website of the Ministry of Industry and Information Technology, you can see what the Xiaomi car looks like on the website of the Ministry of Industry and Information Technology. You can see that it is a sedan, which I think is very clear.

There are so many details about the car itself and I think it might not be convenient for me to reveal it, but I want to say a few points that I can clarify. First of all, the trend in the entire ecology of our people and cars is very clear. Cars are very important and indispensable in Xiaomi's overall ecological strategy.

In the future, when users buy Xiaomi products, they do not buy individual products, but an ecological company. The future will definitely see mobile phones as the core, bringing about mutual collaboration across consumer electronics.

The mass production target for the first half of next year remains unchanged, and a second winter test will be carried out next. There are around 3,000 people working in the development of Xiaomi cars.

Well, I think the strategic ecology of people and cars will also be based on classifying user groups and then driving other brands through strong brands such as mobile phones and automobiles to export product experiences and our solutions to our users.

There is not much room for gross margin for high-end phones

Our high-end phones are still in the investment period, so everyone has seen our team's products, and I think they are progressing very smoothly.

Today, it is difficult for us to completely separate the gross margins of the high end from the low end. However, I think there is still a lot of room for high-end Māori profit in the future, and I don't think our scale today has changed from quantitative to qualitative.

I think Xiaomi has achieved a certain breakthrough in terms of quantity in terms of high-end, but I think it will take some time until my cost advantage is finally presented, but I believe the potential is there, and we are confident that it will be tapped.

For any leading brand in the future, I don't think it will only serve one customer group; it will definitely be the entire population, omni-channel.

So how can we satisfy all platforms? As you can see today, for a big brand like Xiaomi, we also have the Redmi brand. Among the Xiaomi brands, we have the Mix series, which also means that we meet the needs of different customer groups through product line segmentation.

Editor/Jeffrey