Xiaomi posts 34% rise in revenue on back of overseas growth as Huawei leaves a gap

Che Pan in Beijing, South China Morning Post

Posted at Nov 25 2020 12:50 PM

Xiaomi Corp, one of the world’s largest smartphone vendors, on Tuesday posted a 34.5 per cent increase in third-quarter revenue on the back of strong growth overseas, but warned of potential supply chain constraints during this quarter.

Some “serious supply shortage” is expected in the December quarter, according to Xiaomi president Wang Xiang in a conference call with analysts after the market closed on Tuesday, following the company’s release of its latest quarterly financial results. He did not elaborate.

Wang said the company will work with its suppliers to ensure that optimal smartphone production capacity is maintained. He indicated that the company experienced a “bigger impact in India due to the shutdown of factories to contain the pandemic”.

He also did not expect the supply chain constraints to have an impact on Xiaomi’s business in Europe, where the company has seized market share from rival Huawei Technologies amid its struggles with US trade sanctions.

Beijing-based Xiaomi reported record high revenue of 72.2 billion yuan (US$11 billion) in the quarter to September 30, up from 53.7 billion yuan a year ago, which beat market analysts’ consensus estimate of 70 billion yuan. Revenue from overseas markets, led by India and Europe, increased 52.1 per cent to a record high of 39.8 billion yuan.

The company posted an 18.9 per cent increase in adjusted net profit to 4.1 billion yuan, up from 3.5 billion yuan in the same period last year and ahead of the 3.3 billion yuan consensus estimate.

Those results reflect the aggressive moves made by Xiaomi to compete against Huawei in the domestic market as well as in international markets, where the Shenzhen-based telecommunications equipment maker has been a strong handset vendor for many years.

Tighter US trade sanctions imposed in August, which prohibit Huawei from bypassing earlier restrictions by sourcing products via third-party suppliers, have been described as a “death sentence” for the company.

Huawei recently sold its Honor budget smartphone business to a Chinese consortium.

“Huawei’s competitors will move fast [in the fourth quarter] and attempt to fill the channel void left by Huawei, as well as taking over its advertising placements and retail floor space,” said Jia Mo, an analyst at market research firm Canalys.

In a report last month on third-quarter global smartphone shipments, Jia said: “In Europe, a key battleground, Huawei’s shipments fell 25 per cent, while Xiaomi’s grew 88 per cent.”

Europe is currently Huawei’s largest market outside China, but the US sanctions on essential smartphone components – ranging from chips, Google’s updated Android operating system and other popular Western apps – have opened opportunities for the likes of Xiaomi, Vivo and Oppo.

That development has bolstered Xiaomi founder and chief executive Lei Jun’s bid for the company to become the No 1 smartphone vendor in Europe in the next few years.

Xiaomi’s Hong Kong-listed shares were down 1.63 per cent to HK$27.15 at the close of trading on Tuesday. Its share price is up around 140 per cent year to date, as tech stocks around the world have been boosted by a big digital push and greater online consumption during the pandemic.

The company beat Apple for the first time to rank as the world’s third-largest smartphone vendor in the past quarter, behind Samsung Electronics and Huawei, according to separate reports from markets research firms IDC, Gartner, Canalys and Counterpoint.

In its third-quarter financial results announcement on Tuesday, Xiaomi said its smartphone revenue grew 47.5 per cent to 47.6 billion yuan, while its smartphone shipments rose 45.3 per cent to 46.6 million units. The company said it had a 13.5 per cent global market share in the same quarter, citing data from Canalys.

Xiaomi’s smartphone shipment growth in the third quarter has “boosted investor confidence that its share gain could turn into future internet user growth”, said Kevin Chen, Hong Kong-based equity research analyst at China Merchants Securities.

Revenue from Xiaomi’s Internet of Things and lifestyle products segment grew 16.1 per cent to 18.1 billion yuan in the third quarter, while its internet services segment increased sales by 8.7 per cent to 5.8 billion yuan.