Xiaomi falters in quest to beat Samsung, Apple as sales slow in third quarter amid global chip shortage, stiff competition in China

Xiaomi posted revenue of US$12.2 billion in the third quarter – up 8 per cent from a year earlier, but missed analysts’ estimates
The Beijing-based smartphone giant’s net profit was down 84 per cent to US$123.5 million in the same period

Xiaomi

Che Panin Beijing

Published: 10:10pm, 23 Nov 2021

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Xiaomi Corp’s quest to become the world’s largest smartphone vendor in three years hit a speed bump in the third quarter, as sales slowed because of the global semiconductor shortage and weak demand in China’s highly competitive handset market.

“The [chip] shortage could result in fewer shipments of 10 million to 20 million units,” said Xiaomi president Wang Xiang in a conference call on Tuesday after the market closed. He estimated shipments this year would be about 190 million units, compared with the company’s earlier target of shipping 200 million smartphones.

“For Xiaomi, the supply side problems are relatively bigger than weaker demand [in China],” Wang said. He added that the unstable supply of components makes it a challenge to plan production.

While the company projected the chip shortage to remain severe in the fourth quarter, it hoped that this supply chain situation could improve next year, according to Wang.

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The rise of Chinese smartphones

Beijing-based Xiaomi’s revenue rose just 8.2 per cent in the third quarter to 78.1 billion yuan (US$12.2 billion), as smartphone shipment volume declined. That was below analysts’ average estimate of 79.2 billion yuan, according to Refinitiv data.

Net profit was down 84 per cent to 788.6 million yuan in the same period, which Xiaomi attributed to 3.5 billion yuan in losses from market investments.

Xiaomi’s shares were down 0.96 per cent to close at HK$20.70 on Tuesday in Hong Kong.

The firm’s smartphone shipment volume fell to 43.9 million units in the third quarter, from 52.9 million units the previous quarter, as the company struggled with component shortages.

“In general, the overseas [smartphone] markets are stable,” Wang said. “[But] overall demand in China’s smartphone market has slid. This is a consensus.”

Smartphone giant Xiaomi to build 20,000 new retail stores in rural China

Earlier this month, Xiaomi announced an ambitious retail infrastructure programme in the world’s largest smartphone market. It will roll out 20,000 new retail stores over the next three years across China’s countryside, which account for 70 per cent of the domestic smartphone market.

It currently operates a network of more than 10,000 bricks-and-mortar stores across the country, according to company chief financial officer Alain Lam.

The firm’s new retail expansion initiative in China’s rural areas reflects how competition in the smartphone industry remains intense even as Huawei Technologies Co, the world’s largest telecommunications equipment maker and formerly China’s biggest smartphone vendor, continues to struggle because of US trade sanctions.

Xiaomi, which surpassed Apple to become the world’s No 2 smartphone vendor in the second quarter, fell back in the global rankings in the third quarter when it ranked third with a 14 per cent market share, according to data from market research firm Canalys. That was behind the 23 per cent share of Samsung Electronics and Apple’s 15 per cent share.

On Xiaomi’s electric vehicle operations, Wang said the development of this business was on track, with more than 500 employees hired recently.