Xiaomi Revenue Falls in Third Quarter Amid Weak Global Smartphone Market

Xiaomi’s quarterly revenue fell by nearly 10 percent as it battles a slumping global smartphone market and weak consumer demand at home.

Mobile device sales fell 11 percent, leading to a decline in all business categories including smart electronics and internet services. The Beijing-based company posted sales of CNY 70.5 billion (about Rs. 80,900 crore), slightly above estimates. But it posted a staggering loss of CNY 1.5 billion (about Rs. 1,711 crore) in the quarter to September, reflecting a write-down of about CNY 3 billion (about Rs. 3,422 crore) in items such as investment losses. Adjusted earnings, which exclude exceptions, beat analysts’ estimates.

China’s Covid Zero policy has sown chaos in the country’s technology industry and supply chains, depressing economic activity. At the same time, electronics demand is cooling as consumers respond to rising inflation and slowing economic growth. Global smartphone shipments are at their lowest level in years due to depressed demand, but Xiaomi has managed to gain market share in Europe, executives told reporters on a conference call.

“The challenge in China is Covid, the situation of the epidemic is still changing,” said President Wang Xiang. “There is still room for growth in overseas markets,” he added.

Global smartphone sales are expected to decline 2.9 percent next year following a 12.2 percent decline in 2022, Jefferies predicted this month. Xiaomi’s unit sales will decline this year and next before recovering slightly in 2024, Jefferies forecast.

That’s because phones sold in recent years are well-built, leaving consumers with less need to buy new ones, Jefferies analysts including Edison Lee and Nick Cheng said in a Nov. 9 paper. And the new models add a few new features, they said.

“Structural weakness is worse than expected,” analysts wrote. The challenges are “combined with a weak economy.”

According to Bloomberg Intelligence, the decline in smartphone sales in China could extend into 2023, even if shipments drop in September. The improvement from the launch of the iPhone 14 may be one-time and the weaknesses of Android seem to be overpowered in the following months. The continued decline in PC shipments to companies shows that the business outlook is still cautious after the shutdown – Steven Tseng and Sean Chen, BI analysts.

Xiaomi reported its first sales decline in the first quarter, followed by a 20 percent decline in sales in the June quarter.

Even world leaders were not spared. Samsung Electronics, the world’s largest maker of phones, displays and memory, has cited falling handset sales in China as a drag on its parts business. Apple Inc. Apple expects to produce at least 3 million more iPhone 14 handsets than expected this year, people familiar with its plans say, mainly because of soft demand for the less expensive versions of the model.

Xiaomi shares have lost half their value in the past year, leaving the electronics giant with a market capitalization of about $31 billion. However, it is doing better than some of its domestic phone-making rivals, such as Oppo and Vivo, due to its international expansion and distribution.

Founder and CEO Lei Jun made electric cars Xiaomi’s home for future growth, pledging $10 billion (roughly Rs. 81,780 crore) in investment and setting up a separate company for the project. Xiaomi has made progress in this field, Wang said without elaborating.

That project will take years to come to fruition, however, leaving the company dependent on a rebound in consumer spending on electronics to revive its sagging fortunes. The sale of Android handsets, where Xiaomi is fighting with Samsung in international markets, is not expected to recover soon, especially not at home in China.

© 2022 Bloomberg LP

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