The Xiaomi Group of Companies (Xiaomi Corporation), a leading global manufacturer of consumer electronics and smart devices, has announced its pre-audit consolidated results for the three months ended 30 June 2023. The Group's strategy of focusing on the premium category has delivered record growth in more than 18 operating areas.
Xiaomi Corporation (Xiaomi Group), a leading global manufacturer of consumer electronics and smart devices, has released its pre-audit consolidated financial results for the three months ended 30 June 2023. Two quarters have passed since the Group announced its new strategy, which places emphasis on both growth and profitability. The figures show that Xiaomi posted a significant profit in this period, while sales growth continued unabated. The latter can be captured in the record performance indicators that describe various aspects of its operations. In Q2 2023, Xiaomi's total revenue reached 67.4 billion yuan, an increase of 13.21TTP3T compared to the previous quarter. The adjusted net profit was 5.1 billion yuan, which means that Xiaomi's profit increased by 1,471T$3T in one year. Xiaomi has not seen such an increase in profit since the fourth quarter of 2021, and the rate of increase was well above market expectations. In the first two quarters of 2023, Xiaomi's adjusted net profit reached 8.4 billion yuan, which was close to the total adjusted net profit of last year.
In the past quarter, Xiaomi has consistently executed its corporate strategy, continuing to reposition its smartphones in the premium category. The company's gross profitability reached a record high of €211T3T as it managed to increase its profit margin in all three business segments - smartphones, IoT and other consumer devices, internet services. In addition, Xiaomi has also greatly improved the efficiency of its own operations and further optimized its inventory management, which has contributed to creating the conditions for the Group's long-term sustainable growth. During the quarter, the group's total expenditure was 10.2 billion yuan, down 2.31TPRK year-on-year. Total inventory value was 38.5 billion yuan, down 33.51TPRK year-on-year and the lowest in the past ten years. Xiaomi's total cash on hand hit a new record, exceeding 113.2 billion yuan. The fact that Xiaomi has such a large cash position shows that the company's operating model is mature and efficient, capable of laying the foundation for growth in the years to come.
Gross margins on smartphones rise to record levels thanks to premiumisation strategy
While the global market for smartphones has seen only modest growth in demand, Xiaomi has taken the initiative to seize the opportunities. According to Canalys, Xiaomi has increased its share of the global smartphone market by 1.6% on a quarterly basis and currently stands at 12.9%. The company has shipped 32.9 million devices to its retail partners worldwide, with its revenue from smartphone sales reaching 36.6 billion yuan in Q2 2023, an increase of 4.6% on a quarterly basis. The gross profit margin of smartphones was 13.3% in this quarter, which means that it grew at a record annual rate of 4.7 percentage points.
According to Canalys market research, in Q2 2023, Xiaomi was ranked in the top five in smartphone sales in 51 countries and regions, and in the top five in 61 countries. The Group was ranked second in Europe and the Middle East in terms of sales, confirming its position as a leading manufacturer in foreign markets.
Xiaomi has leveraged its competitive advantage in bringing cutting-edge technologies to the premium segment. It recently launched the Xiaomi MIX Fold 3
smartphone. Within minutes of hitting the shelves, sales of the new model were 2.25 times higher than the previous generation, a record for the Group's foldable phone category. According to third-party information, in the second quarter of 2023, Xiaomi's smartphones sold in the 4,000-6,000 yuan price range gained 12.7% market share in China, representing a year-on-year growth of 6.2 percentage points. Meanwhile, Xiaomi's smartphones priced at 3,000 yuan and above, the result of four quarters of growth, have sold at an unprecedented rate in the Chinese market.
The IoT segment also continued to grow, with sales from smart home devices up by more than 70%
With campaigns aimed at boosting market demand and consumption, Xiaomi managed to boost its revenue from IoT and lifestyle products to 22.3 billion yuan, with a growth of 12.3%. Gross profit was 17.6%, up 3.3 percentage points year-on-year and a new record. Xiaomi has also expanded interconnectivity to other application areas. As of 30 June 2023, 654.5 million devices (excluding mobile phones, tablets and laptops) were connected to the Group's AIoT platform, representing an annual growth of 24.2%. The number of people with five or more devices connected to Xiaomi's AIoT platform was 13 million - 27.8% more than a year earlier. As of June 2023, the number of monthly active users (MAUs) of the Mi Home App increased to 82.9 million, up 17.1% year-on-year.
In the last quarter, sales of large household appliances (including air conditioners, refrigerators and washing machines) increased by more than 701T3T
increased. Within this, revenue from Xiaomi air conditioners increased by more than $90%. The Group's refrigerator and washing machine segment outperformed the market average. More than 500,000 units of refrigerators were shipped, while sales of washing machines also exceeded 300,000 units. According to All View Cloud ("AVC"), Xiaomi shipped the most TV sets in China in the first half of 2023.
The internet ecosystem is thriving by most operational indicators
Xiaomi's internet user base has expanded worldwide. The number of monthly active users of MIUI reached 606 million in China in June 2023 and 149.3 million in foreign markets. In Q2 2023, Xiaomi's internet-related services generated revenue of 7.4 billion yuan, a record growth of 6.8% year-on-year, and the gross profit margin of internet services reached 74.1%.
In the second quarter of 2023, Xiaomi's revenue from advertising was 5.1 billion yuan, up 131T$3.1 billion year-on-year. This is also a record.
Revenues from performance and brand advertising in China and abroad also reached a new quarterly high. Xiaomi's gaming business generated revenue of 1 billion yuan, an increase of 7.51TTp3T as this segment has been growing steadily over the past eight quarters.
Xiaomi has been open to international partnerships in internet services outside China. In the second quarter of 2023, Xiaomi also achieved record revenue of 2 billion yuan from internet services sold in overseas markets, with an increase of 19.7%. As a result, the overseas business now accounts for 26.8% of the Group's internet services revenue, up 2.9 percentage points year-on-year.
Xiaomi develops its R&D strategy with more than 3000 highly skilled AI professionals
Since the beginning of the year, the global technology industry has been characterised by the rise of artificial intelligence (AI). In China, Xiaomi is at the forefront of the adoption of this new technology. The company started building its AI team in 2016, which has grown six-fold in seven years and now has more than 3,000 highly skilled AI professionals. Xiaomi has developed capabilities in visual, audio and acoustic technologies, knowledge graphs, natural language processing ("NLP"), machine learning and multimodal AI, among others.
Xiaomi recently unveiled its first proprietary large language model ("LLM") on 10 August 2023, a 6 billion parameter large language model that ranked first in the C-EVAL list of models with the same level of parameters and also ranked first in the CMMLU list of Chinese language large language models. As for the direction of future development of the Large Language Model ("LLM"), Xiaomi will focus on low-resource-intensive and local-context applications with a balance of efficiency and effectiveness, rather than focusing solely on increasing the number of parameters. Xiaomi has equipped its intelligent, voice-based AI assistant ("小愛同學") with such large language models and has started a closed-loop testing of it, which is only open to invited users.
In the second quarter of 2023, Xiaomi's R&D expenditure reached 4.6 billion yuan, an increase of 211T3T yuan compared to the same period last year. Xiaomi expects its R&D investment to exceed 100 billion yuan between 2022 and 2026.
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