Xiaomi Corp. has reported stronger-than-expected profits in the smartphone market, driven by its cost-cutting initiatives and a strategic focus on more expensive mobile devices. The company’s net income doubled to 3.67 billion yuan in the three months ending June, surpassing the average estimated net income of 3.16 billion yuan. Despite challenges, Xiaomi’s revenue decreased by a less-than-anticipated 4% to 67.4 billion yuan, marking a narrowing decline compared to previous quarters.
The Beijing-based smartphone company’s efforts to reduce costs have helped stabilize its financial performance amid China’s gradual economic recovery. The domestic mobile market is showing signs of stabilizing after a period of decline. Xiaomi’s sales strategy also saw success as it sold more premium smartphones, leading to a 24% increase in the average selling price in China.
Executives at Xiaomi have reiterated the company’s commitment to expanding into new markets, particularly in Latin America and Europe. President Lu Weibing emphasized the importance of global expansion for a consumer electronics player like Xiaomi. He also mentioned positive developments in the Indian market, expressing confidence in improvements becoming evident soon.
Beyond smartphones, Xiaomi’s co-founder Lei Jun has shifted attention to a $10 billion electric car venture, which recently gained approval from China’s state planning agency. The EV business, with its first vehicle planned for next year pending regulatory licenses, could contribute up to 5% of Xiaomi’s revenue by 2024, according to Bloomberg Intelligence estimates.
Xiaomi has also increased its research spending by 21%, allotting a significant portion to its electric vehicle project. The company hired thousands of employees to bolster its AI development, aligning with the wider industry trend of investing in artificial intelligence advancements.
While shipment levels have been influenced by inventory adjustments, analysts from Citigroup noted a positive trend in inventory digestion and expected healthier shipment levels.
Xiaomi’s success in the smartphone market is driven by its ability to adapt to changing market dynamics, focusing on cost optimization, and strategically positioning its products. The company’s expansion into new markets and ventures like electric vehicles demonstrate its commitment to exploring diverse avenues for growth and innovation.