Xiaomi’s 2019 Transformation Has Fared Well for the Company’s Top Line

Xiaomi HQ in Beijing (Source: eshwar_nc)

Xiaomi, one of China’s most prominent smartphone and AIoT brands, went through a considerable makeover last year that many took with caution. In early 2019, Xiaomi decided to veer away from a smartphone-centric development strategy and increase its investment in AIoT, planning to invest at least 50 billion yuan (roughly $7 billion) in the next five years to become a prominent leader in the field of smart products. 

Apart from substituting a singular handset-focused strategy with the dual “phone + AIoT” strategy, in 2019, Xiaomi Group also announced the launch of a dual-brand strategy. Redmi, Xioami’s lower-end sub-brand, was made independent in order to allow Xiaomi to form a distinct and more premium brand position. In 2019, both brands managed to sell 125 million units. 

Although independent, Redmi has achieved remarkable results. The brand’s first flagship Redmi K20 series boasted annual global shipments of more than 4.5 million units in 2019. At the same time, Redmi also took the lead in launching the first affordable 5G mobile phone, the Redmi K30, in China with a price of less than 2,000 yuan ($282), lower than any other 5G phone on the market.

According to Xiaomi Group’s full-year results for 2019 announced on March 31, its businesses have grown despite all the headwinds in the industry, exceeding market expectations. The company’s total annual revenue exceeded 200 billion yuan ($28 billion), reaching 205.8 billion yuan ($29 billion), a year-on-year increase of 17.7%; adjusted net profit was 11.5 billion yuan ($1.62), a year-on-year increase of 34.8%.

Xiaomi ’s global smartphone shipments of 125 million units ranked fourth in the world, while revenue from the IoT and consumer goods business reached 62.1 billion yuan ($8.8 billion), a year-on-year increase of 41.7%; Internet business revenue was 19.8 billion, a year-on-year increase of 24.4 %. The overseas market revenue climbed to 91.2 billion yuan ($2.8 billion), with Xiaomi in more than 90 countries and markets around the world.

The tech giant’s total revenue in Q4 of 2019 stood at 56.5 billion yuan ($8 billion), a year-on-year increase of 27.1%, making it the highest moneymaking quarter for Xiaomi Group in 2019. Adjusted net profit reached 2.3 billion yuan ($320 million), a year-on-year increase of 26.5%.

However, despite doing quite well throughout the year, Xiaomi, as well as other smartphone manufacturers, was challenged by the COVID-19 pandemic. The company noted that due to the closure of Chinese factories, it encountered temporary production interruptions in February and March 2020. As work at most factories has now resumed, Xiaomi reports that their production capacity has returned to 80% to 90% of the normal level. 

Among other notable transformations that Xiaomi went through in 2019 was its continued increase on the R&D investment front. Xiaomi’s R&D investment from 2016 to 2019 grew from 2.1 billion yuan ($300 million) to 7.5 billion yuan ($1.06 billion), with a compound growth rate of 53% in the past four years. In 2020, it is estimated that 10 billion yuan ($1.41 billion) will be allocated to R&D.

Xiaomi’s AIoT business maintained rapid growth throughout 2019. Revenue from the IoT and consumer products business reached 62.1 billion yuan ($8.8 billion), a year-on-year increase of 41.7%. Xiaomi’s smart TV shipments on the Chinese mainland exceeded 10 million units in 2019, setting a shipment record in the Chinese TV industry and ranking first in the market. Global shipments of Xiaomi TVs reached 12.8 million units, a year-on-year increase of 51.9%. Xiaomi TV has done well in overseas markets. According to IDC statistics, in Q4 of 2019, Xiaomi TV dominated the Indian market.

Xiaomi Group currently regards home appliances as an important part of its AIoT business, aiming to expand its product portfolio and strengthen the interoperability between products. Xiaomi has become the number one brand for smart living based on the number of devices connected to its online platform. As of December 31, 2019, the number of IoT devices connected to Xiaomi’s IoT platform (excluding mobile phones and laptops) reached 235 million, an increase of 55.6% year-on-year. 

Xiaomi took an indisputable lead in smart wearable devices. According to Canalys statistics, Xiaomi ranked first in the world in 2019 for shipments of smart watches and bracelets. Furthermore, the number of MAUs of its intelligent voice assistant XiaoAi exceeded 60 million in December 2019, an increase of 55.7% year-on-year.

In Q4 of 2019, the proportion of emerging Internet business revenue (non-Chinese mobile phone Internet revenue) continued to expand, reaching 43%, a surge of 112.6% year-on-year, driving the overall growth of the company’s Internet business. Xiaomi’s emerging Internet service business direction includes Internet services other than advertising, and games on smartphone devices in mainland China. TV Internet services, e-commerce and fintech have been particularly successful.

Xiaomi’s revenue from overseas markets exceeded $10 billion, reaching $12.9 billion, a year-on-year increase of 30.4%. In Q4 of 2019, overseas revenue reached 26.4 billion yuan, a year-on-year increase of 40.7%, accounting for 46.8% of total revenue. In 2019, Xiaomi was in more than 90 countries around the world, becoming a truly global enterprise. According to Canalys data, the company’s smartphone business currently ranks in the top five in more than 40 countries and regions.