Xiaomi misses earnings, sales expectations in 3rd quarter as smartphone demand falls

The Chinese company logged sales of 70.5 billion yuan and net loss of 1.5 billion yuan
Electronics demand is cooling as shoppers react to elevated inflation and slowing economic growth

Xiaomi

Bloomberg

Published: 7:47pm, 23 Nov 2022

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Xiaomi Corp’s quarterly revenue fell almost 10 per cent as it battled a slumping global smartphone market and weak consumer demand at home.

The Beijing-based company logged sales of 70.5 billion yuan (US$9.85 billion) and net loss of 1.5 billion yuan for the quarter through September, reflecting a write-down of almost 3 billion yuan on items such as investment losses. Analysts had expected 70.2 billion yuan revenue and 1.8 billion yuan net profit on average. Adjusted net income exceeded analysts’ estimates.

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The rise of Chinese smartphones

China’s Covid -zero policy has sown chaos across the country’s tech industry and supply chains, depressing economic activity. At the same time, electronics demand is cooling as shoppers react to elevated inflation and slowing economic growth.

Global smartphone sales are set to decline 2.9 per cent next year following a 12.2 per cent slump in 2022, Jefferies predicted this month. Xiaomi’s unit sales will decrease this year and next, before recovering slightly in 2024, Jefferies forecast. Phones sold in recent years are well-built, leaving consumers with no need to purchase new ones, Jefferies analysts including Edison Lee and Nick Cheng said in the November 9 note. New models are adding few new innovations, they said.

“Structural weakness is worse than expected,” the analysts said, and the challenges are “compounded by a weak economy.”

Xiaomi reported its first sales drop in the first quarter, followed by a 20 per cent decline in sales for the June quarter.

A Xiaomi store in downtown Beijing, China. Photo: Simon Song

Even the global leaders have not been spared. Samsung Electronics Co, the world’s biggest maker of phones, displays and memory, called out falling handset sales in China as a drag on its components business. Apple expects to produce at least 3 million fewer iPhone 14 handsets than originally anticipated this year, people familiar with its plans have said, primarily due to softer demand for the less expensive versions of the model.

Shares of Xiaomi have lost half their value in the past year, leaving the electronics giant with a market capitalisation of about US$31 billion. Still, it has fared better than some of its domestic phone-making rivals, such as Oppo and Vivo, thanks to its wider international footprint and distribution.

Co-founder and chief executive officer Lei Jun has made electric vehicles Xiaomi’s lodestar for future growth, pledging US$10 billion in investment and spinning off a separate company for the venture.

That project will take years to come to fruition, however, leaving the company reliant on a recovery in consumer spending on electronics to revive its flagging fortunes. Sales of Android handsets, where Xiaomi does battle with Samsung in international markets, are not expected to recover soon, especially not at home in China.