Xiaomi growth slows in third quarter as China smartphone demand wanes

Xiaomi Corp has posted its slowest-ever quarterly revenue growth, as domestic demand for smartphones grapples with a protracted lull in sales and larger rival Huawei Technologies increases its share of the market.

Demand for smartphones has eased in China as consumers hold on to their devices for longer. More consumers have also rallied behind Huawei, boosting sales of the world’s second largest smartphone vendor, which the United States added to a trade blacklist in May.

Smartphone sales still account for most of Xiaomi’s revenues, but it has been promoting its internet services division, which mainly consists of online advertising sales. The business, however, accounts for just 10 per cent of total revenue – the same proportion as when the company listed its stock in August of last year.

Revenue at Xiaomi’s smartphone business fell 8 per cent to 32.3 billion yuan (US$4.6 billion) in the quarter ended September 30. The Beijing-based company sold about 32.1 million phones during the period, roughly one million units fewer than a year earlier.

Xiaomi wants to beat Huawei abroad, but it’s losing ground at home

Total revenue rose 5.5 per cent to 53.7 billion yuan from the same period last year, largely in line with analysts’ expectations, according to Refinitiv data.

Xiaomi has looked to foreign markets to make up for the sales drop at home, but that came at a price with selling and marketing expenses jumping 16 per cent in the quarter.

Excluding one-time items, Xiaomi earned 3.5 billion yuan, versus 2.9 billion yuan a year ago.

Investors have so far appeared unimpressed by Xiaomi’s efforts, pushing the stock down nearly a third so far this year.

The company is looking to aggressively roll out 5G-enabled handsets in 2020, as mobile networks based on the next-generation technology become more widely available across China. The company has released two 5G smartphone models to date, one in Europe and one in its home market.

Last month, Xiaomi chief executive Lei Jun said the company would release more than 10 5G smartphones priced for a range of budgets next year.

“If you look at the Chinese smartphone market in the past two years, it is true that there has been some decline, and recently we have also seen some pressure in the market,” Xiaomi chief financial officer Chew Shou Zi said on an earnings call.

“Once the 5G era is with us, then I believe we will start to see improvement in the smartphone market quite significantly.”