Xiaomi Quarterly Sales Fall on Waning Smartphone Demand

Xiaomi Corp.’s quarterly revenue fell almost 10% 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 ($9.85 billion) and net loss of 1.5 billion yuan for the quarter through September, reflecting a writedown 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.

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% next year following a 12.2% 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 Nov. 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.”

What Bloomberg Intelligence Says

China’s smartphone sales downturn could extend to 2023, even though the shipment decrease narrowed in September. A boost from the iPhone 14 launch could be one-time and Android weakness looks to be overwhelming in the following months. Persistent drops in corporate PC shipments indicate business outlook is still cautious post-lockdown.

-- Steven Tseng and Sean Chen, BI analysts

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

Even the global leaders haven’t 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 Inc. 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 capitalization of about $31 billion. Still, it’s 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 $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.