Strategic Moves: EV Sector and Smartphone Market

Xiaomi’s entry into the smart Electric Vehicle (EV) market and continuous innovation in the smartphone segment have been central to its financial success.

The company retained its position as the third-largest smartphone vendor globally, with a total shipment of approximately 145.6 million units.

A notable strategy was the premiumization of its smartphone offerings, which led to an over 19% increase in the average selling price in mainland China.

Growth in IoT and AIoT Platforms

Revenue from Xiaomi’s IoT and lifestyle products reached RMB 80.1 billion, with a gross profit margin of 16.3%.

The number of connected IoT devices on Xiaomi’s AIoT platform as of December 31, 2023, stood at 739.7 million, a 25.5% increase year-over-year.

This expansion is reflective of Xiaomi’s strong position not only in the domestic market but also internationally, with significant presence and market share growth in various regions including the Middle East, Latin America, Africa, and Southeast Asia.

Future Directions: R&D and Global Technology Leadership

Xiaomi announced its strategic goals for 2020–2030, emphasizing long-term investment in foundational core technologies to assert its leadership in global tech innovations.

The company’s R&D expenses for 2023 amounted to RMB 19.1 billion, a 19.2% increase from the previous year, highlighting its commitment to innovation.

About Xiaomi Corporation

Xiaomi Corporation was founded in April 2010 and listed on the Hong Kong Stock Exchange in July 2018. With its core in smartphones and smart hardware connected by an IoT platform, Xiaomi aims to create quality products that enhance global living standards through innovative technology.

Introduction to Xiaomi e-commerce platform Youpin

Priced at RMB 49,999 (US$7,200), Mi TV LUX Transparent Edition claims to be the world’s first mass-produced transparent TV. With an edge-to-edge transparent self-luminous display transmitting images that seem to be suspended in the air.

When Mi TV LUX Transparent Edition is turned off, it looks like a mirror glass display. The pictures it displays seem to be floating in the air, merging the virtual and the real.

It embs all the processing units in its base stand, preserving the compact shape of the screen and in the meantime brings about countless technical challenges.

Xiaomi has become the world’s first mass producer of transparent OLED TVs, as well as China’s number one OLED Basic Module (OBM) manufacturer.

Its 55″ transparent OLED panel features a 150000:1 static contrast ratio and an infinite dynamic contrast ratio, offering extra rich blacks and unmatched brightness.

Leveraging its DCI-P3 93% color spectrum support, Mi TV LUX Transparent Edition is capable of restoring the awe-inspiring colors that bring images to life. Its 10-bit panel displays 1.07 billion color combinations, an extra-wide color spectrum far beyond what the human eye can perceive.

On top of that, the TV comes with a 120Hz refresh rate and 120Hz MEMC technology, providing consumers with smoother and clearer motion representation. The 1ms fast response rate also makes gaming truly lifelike with smooth controls and low latency.

Similar to its predecessor, it is is also equipped with an AI Master Smart Engine, along with the MediaTek 9650 custom-made TV chip, with over 20 optimization algorithms and dedicated optimization for 5 major use scenarios, the device intelligently refines graphic resolution to create vibrant pictures.

It adopts an aesthetic design that combines a 5.7mm ultra-thin body rectangular screen and a round base, creating an ultra-immersive viewing experience. The base stand is covered with a millimeter-grade finish that resembles compact discs blending perfectly into any surroundings.

The TV is perfect not only for homes, but also for galleries, museums, shopping malls, and theaters.

Mi TV LUX Transparent Edition runs on custom-made MIUI for TV. The user interface – including the Home page, Settings, My App – is specifically designed to better demonstrate the visual features and strength of the transparent screen, creating a unique user experience.

The system also supports Always-On display and allows users to customize display images and texts.

Mi TVs have been ranked at the top for shipments for six consecutive quarters from Q1 2019 to Q2 2020 based on data from AVC. In the past seven years, Mi TV business has grown from an industry newcomer to the first Chinese TV brand with annual shipments exceeding 10 million units.

China smartphone market update »

Benefiting from the continued expansion in its global smartphone market share, the monthly active users (“MAU”) of MIUI increased to 330.7 million, an increase of 26.7% year-over-year.

As of March 31, 2020, the number of connected IoT devices (excluding smartphones and laptops) on Xiaomi IoT platform reached 252.0 million, an increase of 42.6% year-over-year.

Xiaomi AI assistant Xiao Ai had 70.5 million MAU in March 2020, an increase of 54.9% year-over-year.

Revenue from its internet services segment in Q1 2020 increased by 38.6% year-over-year to RMB5.9 billion, accounting for a record high of 11.9% of its total revenue. Revenue from overseas markets in Q1 2020 totaled RMB24.8 billion, an increase of 47.8% year-over-year, for the first time, accounting for half of its total revenue.

According to Canalys, Xiaomi smartphone shipments in Western Europe increased by 79.3% year-over-year and it attained the largest market share in Spain for the first time.

Xiaomi Smartphone

In Q1 2020, revenue from Xiaomi’s smartphone segment totaled RMB30.3 billion, an increase of 12.3% year-over-year. It shipped 29.2 million units of smartphones in Q1 2020, an increase of 4.7% year-over-year.

According to Canalys, in the first quarter of 2020, Xiaomi ranked 4th globally in terms of smartphone shipments, and Xiaomi’s market share rose to 11.1%. Xiaomi was one of only two of the top five smartphone companies worldwide to maintain year-over-year growth in shipments.

In February 2020, Xiaomi launched Mi 10 and Mi 10 Pro. Shipments of Mi 10 and Mi 10 Pro exceeded 1 million units two months after their launch, enabling the Xiaomi brand to further strengthen its position in the premium smartphone market.

Mi 10 and Mi 10 Pro were launched overseas in late March with prices starting at €799 and €999, respectively. Boosted by Xiaomi’s premium smartphone models, the average selling price (“ASP”) of Xiaomi’s smartphones increased by 7.2% year-over-year in Q1 2020.

The ASP of Xiaomi’s smartphones in mainland China and overseas markets increased by 18.7% and 13.7% year-over-year respectively.

In April 2020, Xiaomi launched Mi 10 Lite Zoom Edition to target the younger consumer segments. With prices starting at RMB2,099, it features a 50x periscope telephoto lens camera and other advanced technologies. Mi 10 Lite 5G was launched in March 2020 in overseas markets, with prices starting at €349.

The Redmi brand continued to introduce highly competitive products at different price points. In March 2020, Redmi launched its flagship K series Redmi K30 Pro and Redmi K30 Pro Zoom Edition, sporting premium features including the Snapdragon 865 processor, LPDDR5, and UFS 3.1, while also featuring a pop-up camera, allowing Xiaomi’s customers to enjoy a full flagship experience at a reasonable price.

On the back of the highly popular Redmi Note 8 series, the second best-selling smartphone model globally in Q1 2020 according to Canalys, Xiaomi launched Redmi Note 9S and Redmi Note 9 Pro in overseas markets, carrying on the ultimate price-performance value proposition of the Redmi brand.

In April 2020, Xiaomi released MIUI 12, the latest version of Xiaomi’s smartphone operating system. Equipped with Xiaomi’s proprietary Mi Light Cone Animation Framework, MIUI 12 offers remarkable animation and a stunning visualized user interface.

In addition, MIUI 12 has introduced a privacy and data protection framework, which enables users to have full visibility of sensitive data retrieval, take control over app permissions, and mask their identity information to remain incognito. MIUI 12 is the world’s first mobile operating system to pass the TÜV Rheinland “Enhanced Privacy Protection for Android Systems” test.

Xiaomi IoT

In Q1 2020, revenue from Xiaomi’s IoT and lifestyle products segment was RMB13.0 billion, increase of 7.8%. Xiaomi’s smart TV business continued to maintain its leading position in both mainland China and overseas markets.

In Q1 2020, despite the overall decline in TV shipments globally due to the pandemic, Xiaomi’s global shipments of smart TVs still increased by 3.0% year-over-year to 2.7 million units.

According to All View Cloud (“AVC”), in Q1 2020, Xiaomi’s TV shipments in mainland China ranked 1st for five consecutive quarters and its global TV shipments ranked among the top five.

In March 2020, Xiaomi launched Redmi Smart TV Max 98”, priced from RMB19,999 (about US$2,815), significantly lower than other ultra-large TVs, bringing high-end TVs to the mass market.

In Q1 2020, Xiaomi continued to expand Xiaomi’s IoT product portfolio and promote the interconnectivity of Xiaomi’s AIoT platform.

In February 2020, Xiaomi introduced Mi AIoT Router AX3600, a WiFi 6 enabled AIoT router, which greatly improves upstream and downstream network speeds, making Xiaomi the first brand in China to support WiFi 6 technology from terminals to routers.

In addition, Xiaomi also launched Mi 65W Fast Charger with GaN Tech, Redmi Smart Display 8” and Mi Bluetooth Speaker with Wireless Charging, all of which enjoyed widespread popularity.

The sales of Xiaomi’s routers increased by 124.0% year-over-year in Q1 2020 and according to AVC, ranked 2nd in mainland China in terms of online router shipments. Sales of Xiaomi’s Xiaomi TWS Earphones, Mi Band, Mi Electric Scooter and Mi Robot Vacuum Cleaner increased by 619.6%, 56.0%, 40.7% and 40.0% year-over-year, respectively.

According to Canalys, Xiaomi ranked 1st in terms of wearable band shipments and 3rd in terms of True Wireless Stereo (“TWS”) earbuds shipments globally in 2019. According to iResearch, Xiaomi also ranked 1st in terms of electric scooter shipments globally in 2019.

Xiaomi Internet Services

In Q1 2020, revenue from Xiaomi’s internet services segment reached RMB5.9 billion, representing an increase of 38.6% year-over-year, accounting for a record high of 11.9% of Xiaomi’s total revenue.

User activity and time spent on Xiaomi’s devices increased in Q1 2020. In March 2020, the MAU of MIUI increased by 26.7% year-over-year to 330.7 million, while the mainland China MAU of MIUI reached 111.5 million.

In Q1 2020, advertising revenue was RMB2.7 billion, an increase of 16.6% year-over-year.

In Q1 2020, online gaming revenue increased by 80.5% year-over-year to RMB1.5 billion, mainly due to the fast-growing online gaming market in mainland China and higher online gaming average revenue per user from Xiaomi’s premium smartphone users.

In Q1 2020, internet services revenue outside of advertising and gaming from mainland China smartphones, including those generated from the Youpin e-commerce platform, fintech business, TV internet services and overseas internet services, increased by 71.5% year-over-year and accounted for 38.1% of Xiaomi’s total internet services revenue.

Xiaomi’s Youpin e-commerce platform continued to broaden its offerings and provide uninterrupted services to customers. The number of new users increased significantly in Q1 2020, laying a strong foundation for further expansion.

In March 2020, MAU of Xiaomi’s smart TVs and Mi Box reached 30.4 million, representing an increase of 46.8% year-over-year. As of March 31, 2020, the number of paid subscribers increased by 53.7% year-over-year to 4.3 million.

In Q1 2020, the MAU of Mi Browser on Xiaomi smartphones in the aggregated overseas market ranked 1st among all browsers. These initiatives increased Xiaomi’s average revenue per user in the overseas market.

Introduction to Xiaomi’s e-commerce platform Youpin

Xiaomi Smartphones: Mi CC9 Pro, Mi Note 10

Mi CC9 Pro

Following the groundbreaking concept phone Mi MIX Alpha, Mi CC9 Pro sets another important milestone for the industry to become the world’s first mass-produced smartphone shipping a 108MP camera.

The 108MP main camera offers a 1/1.33″ large image sensor – twice as large as the mainstream 48MP cameras. It supports OIS and features an industry leading resolution of 12032 x 9024.

It also incorporates a 4-in-1 (1.6μm) Super Pixel with the latest RAW multi-frame noise reduction algorithm to capture rich detail, even in low-light conditions.

Mi CC9 Pro sports a penta camera setup that includes a 12MP telephoto camera, a 5MP telephoto camera, a 20MP ultra wide-angle camera, and a 2MP macro camera.

The 12MP telephoto camera supports 2x optical zoom with dual PD autofocus, while the 5MP telephoto camera supports 10x hybrid zoom. All cameras cover day-to-day needs for smartphone photography from landscape, portraits, close-up shots, and even for 1.5cm super macro photography.

A premium offering – the Mi CC9 Pro Premium Edition was also announced at launch. It comes with an 8P lens that produces images that are clearer and of higher definition. It also surged to the top of DxOMark camera rankings with an overall score of 121 and broke the record for video segment with a world’s highest score of 104.

On the hardware front, the Mi CC9 Pro dresses to impress with the flagship two-sided curved screen and a 6.47’’ 19.5:9 Full-HD Display. Adopting a COP sealing technology, Mi CC9 Pro has a 3.43mm chin bezel, making it the most narrow Xiaomi smartphone apart from the Mi MIX Alpha. Mi CC9 Pro also supports 30W fast charge, which brings its 5260mAh high-capacity battery to 100% under 65 minutes.

Mi CC9 Pro and Mi CC9 Pro Premium Edition will be priced at RMB 2799 and RMB 3499 respectively. Three color variants Aurora Green, Glacier White and Midnight Black will be available on official Xiaomi channels in Mainland China starting November 11, 2019.

Mi Note 10

Xiaomi also announced the return of its Mi Note series with Mi Note 10, the latest device of its premium flagship lineup.

Xiaomi’s Mi Note 10 encompasses five different lenses – a 108MP wide-angle lens, 5MP telephoto lens, 12MP telephoto lens, 20MP ultra wide-angle lens, and a macro lens. This setup enables a seamless zoom experience from 0.6x to 50x without compromising image quality.

With the Samsung ISOCELL Bright HMX 108MP sensor, Mi Note 10 features the highest resolution of any smartphone on the market – 12032 x 9024.

For the first time ever, the 108MP camera can produce billboard-level prints up to 4.24 meters high. The device offers a 1/1.33″ large image sensor that supports 4-in-1 pixel binning to capture more detail in low-light conditions, while the 4-axis OIS enables unmatched clarity.

Photography enthusiasts who look to produce the most natural looking portrait photos will be pleased with the Mi Note 10’s 12MP 2x telephoto lens at 50mm focal length, which is one of the most popular focal lengths used by professional portrait photographers. Under low light conditions, the 1.4μm large pixel size and dual PD autofocus allows for sharper and brighter portraits.

The 5MP 5x telephoto lens is also capable of 10x hybrid and 50x digital zoom to complete the epic zoom range. In addition, the lens is equipped with OIS and a f/2.0 aperture for better images under non-optimal lighting environments.

With its 117 degrees field of view, the 20MP ultra-wide angle lets users capture epic landscapes and large group photos without having to cut people out; while the macro lens offers autofocus for closeups images.

Also presented today is Redmi Note 8T, the latest smartphone to join the Redmi family. The device offers a 48 MP quad camera setup and features high-end specifications, starting from €179.

Mi Watch

Featuring a flagship 1.78’’ AMOLED square screen, Mi Watch offers an immersive viewing experience with a 326 PPi pixel density and an elegant four-side curved design.

Being the world’s first wearable to sport a Qualcomm®️ Snapdragon WearTM 3100, Mi Watch guarantees a robust device performance and low power consumption. The device also boasts independent speakers, NFC function, and supports WiFi and Bluetooth connection.

Equipped with a built-in six-axis sensor and a 3rd generation heart rate monitor (HRM) sensor, Mi Watch is able to precisely detect complex motion gestures and heart rate fluctuations during physical activities.

With these capabilities, Mi Watch offers up to 10 pro-sport modes such as outdoor running, outdoor biking, open water swimming, and mountain climbing. It also works with professional sports analytics provider FirstBeat to closely track users’ sleep quality, blood pressure levels, heart rate, and physical energy.

Mi Watch also comes with eSIM, a built-in chip that allows users to make phone calls and connect to the internet effortlessly without inserting a physical nano-SIM. With such technology, users can either share the same phone number with their smartphone for seamless connectivity or have a new private number for the Mi Watch exclusively.

Adding on to all these flagship features, Mi Watch provides a revolutionary UI experience with the MIUI For Watch system, offering 100+ dial plate selections and 40+ of the most used apps for downloading. It also remains an open system for developers to create tremendous possibilities.

XiaoAi AI Assistant can be activated for users to easily use voice commands for music playback, phone calls, and navigation. When connected to the Xiaomi AIoT system, Mi Watch is capable of operating thousands of Xiaomi smart home appliances.

Along with the standard Mi Watch, Mi Watch Special Edition was also announced, with a limited offering of 30,000 units worldwide.

Featuring a major upgrade to blue sapphire glass as the screen material, the Mi Watch Special Edition adds a classy, aesthetic touch to your day-to-day look. The package also comes with an in-box magnetic charger, an adapter, laser-printed limited product code, suede cleaning cloth, certification for limited collection, and a personalized nameplate.

Mi Watch will be available at RMB 1999 for the Black and Silver color variants. Pre-orders start on November 5 via official Xiaomi channels in Mainland China. Mi Watch Special Edition will be priced at RMB 2999 and has a limited number of 30,000 units worldwide, pre-orders will start around mid-December.

Mi TV 5

The newly released Mi TV 5 series features a 1.8mm ultra-narrow metal bezel and a 5.9mm slim body, delivering a compact, futuristic design that is perfectly fit for a modern home.

On the performance front, Mi TV 5 series adopts a flagship 12nm T972 chip that is jointly developed by Xiaomi and Amlogic.

It has a core frequency of up to 1.9GHz, allowing a 63% improvement of overall performance compared to its predecessor, while concurrently supporting 8K content decoding. For storage, Mi TV 5 and Mi TV 5 Pro both provide industry-leading large memory capacity of 3GB+32GB and 4GB+64GB respectively.

Mi TV 5 Pro boasts a 4K quantum dot TV panel and an amazing 108% NTSC color spectrum compared to the industry standard of 72%.

It also meets one of the most outstanding HDR standards – HDR 10+ to provide a stunning graphic display for both game players and Blu-ray lovers. MEMC technology is also adopted to ensures a smooth and high-definition motion picture playback.

All Mi TV 5 variants are enabled with a Far-field Voice Recognition technology that allows users to wake theXiaoAi AI Assistant from a distance without the need of a remote control. Hence, it only takes a simple voice command to conduct film searching, weather checking, or smart device operations.

Built-in microphones are located right in the middle of the bottom frame and are on stand-by 24 hours a day, ensuring the Mi TV 5’s “XiaoAi AI speaker” is ready even during screen-saver mode.

Mi TV 5 Pro 55’’, 65’’ and 75’’ variants will be priced at RMB 3699, RMB 4999, and RMB 9999 while Mi TV 5 55’’, 65’’, 75’’ priced at RMB 2999, RMB 3999, and RMB 7999 respectively. Pre-orders start at 18:00 China time on November 5, and sales on official Xiaomi channels in China will start on November 11.

Xiaomi’s monthly active users (“MAU”) of MIUI reached 278.7 million, an increase of 34.7% YoY. AI assistant “ Xiao’ai ” had 49.9 million MAU; Xiaomi ranked 4th globally in terms of smartphone shipments; and, global shipments of its smart TVs reached 2.7 million units.

Xiaomi financial performance

In the second quarter of 2019, Xiaomi recorded RMB52.0 billion in revenue, representing an increase of 14.8% over the corresponding period of 2018. Gross profit margin increased to 14.0% from the 12.5% achieved in the corresponding period of 2018. Adjusted Net Profit increased by 71.7% to RMB3.6 billion. As of June 30, 2019, its total cash resources amounted to RMB51.1 billion.

The “Smartphone + AIoT” dual-engine strategy that Xiaomi adopted at the beginning of the year has borne fruit. Its user base has continued to expand and the number of devices connected to its platform has continued to grow.

In June, 2019, monthly active users (“MAU”) of MIUI reached 278.7 million, an increase of 34.7% over the corresponding period of 2018. The number of connected IoT devices (excluding smartphones and laptops) on its IoT platform reached approximately 196 million units as of June 30, 2019, representing year-over-year growth of 69.5%.

Meanwhile, its AI assistant “ Xiao’ai ” had 49.9 million MAU in June 2019, representing a year-over-year increase of 88.3%.

Xiaomi has won a number of international recognitions in 2019 to date. It took Xiaomi only 9 years to debut on the Fortune Global 500 list of 2019, becoming the youngest company on the list this year. Furthermore, Xiaomi made it into the 2019 BrandZ Top 100 Most Valuable Global Brands ranking for the first time, ranking 74th with a brand value of US$19.8 billion. Xiaomi has also been recognized as one of the 2019 Forbes China’s 50 Most Innovative Companies.

Xiaomi Smartphones

Its smartphone segment recorded RMB32.0 billion in revenue in the second quarter of 2019, representing an increase of 5.0% over the corresponding period of 2018. Its smartphone sales volume in the second quarter of 2019 reached 32.1 million units.

According to Canalys, Xiaomi ranked 4th globally in terms of smartphone shipments during the second quarter of 2019 and its market share in terms of global smartphone shipments increased from 9.5% in the second quarter of 2018 to 9.7% in Q2 2019.

Both its Xiaomi brand, which focuses on pioneering advanced technologies, establishing itself in the mid- to high-end markets, and building online and offline new retail channels, and its Redmi brand, which is positioned to pursue the ultimate price-performance ratio and focus on online channels have performed well.

After the launch of the new flagship model K20 series under the Redmi brand, Xiaomi has established a comprehensive Redmi smartphone product portfolio that covers a wide price range. In particular, the global sales volume of the Redmi Note 7 series reached 20 million units as of the date of this announcement, achieving this milestone in only around 7 months since its launch on January 10, 2019.

In addition, the global shipments of the K20 series already recorded more than 1 million units within the first month of its launch.

On July 2, 2019, Xiaomi launched the CC series under the Xiaomi brand, which includes Mi CC9, Mi CCe9, and Mi CC9 Meitu Edition. The CC series is positioned as a fashionable series targeting younger customers. The CC series places an emphasis on being visually appealing in terms of both form and function, offering stylish product design and enhanced photography experience.

Mi CC9 Meitu Edition is a joint development with Meitu Inc. which specifically targets the female user market. Leveraging its product development and supply chain management capabilities, as well as Meitu’s image-related algorithms and its deep understanding of female users, the Mi CC9 Meitu Edition offers outstanding photographic experiences and builds a solid foundation for its ongoing expansion into more diversified user markets.

Its products have been strongly recognized by the market as a result of the successful implementation of its multi-brand strategy. The average selling price (“ASP”) of its smartphones has continued to increase, achieving year-over-year growths of 13.3% and 6.7% in mainland China and overseas markets, respectively. In Q2 2019, the revenue generated by smartphones sold for RMB2,000 or more accounted for 32.3% of the total revenue of the smartphones segment.

Following the granting of 5G business licenses in mainland China, 5G technology has officially started to be implemented for commercial use. The commercialization of 5G technology could potentially lead to a new smartphone replacement cycle and boost the overall demand of the domestic market.

Xiaomi established a research and development team back in 2016 for advanced research on 5G technology and are now well-prepared for the commercialization of 5G. The Mi MIX 3 5G, its first 5G model was already available in various European countries, and its second 5G smartphone model will also be launched in China in the second half of the year.

The gross profit margin of its smartphone segment increased from 3.3% in the first quarter of 2019 to 8.1% in Q2 2019. During the early transition period from 4G to 5G technology, Xiaomi will continue to invest in research and development of relevant technologies while remaining prudent with its cash flows and profitability.

IoT and lifestyle products

In Q2 2019, the revenue of the IoT and lifestyle products segment rose by 44.0% to RMB14.9 billion over the corresponding period of 2018. Its smart TV business continues to have a leading edge in both mainland China and overseas markets.

Global shipments of its smart TVs reached 2.7 million units, representing year-over-year growth of 41.1%. According to AVC, Xiaomi ranked 1st in terms of TV shipments in mainland China for the six months ended June 30, 2019.

Xiaomi ranked 1st in terms of smart TV shipments in India for five consecutive quarters as of the second quarter of 2019. With its efforts in expanding its smart TVs globally, Xiaomi achieved a top 5 position in terms of global TV shipments for the six months ended June 30, 2019, according to AVC.

Xiaomi has positioned large home appliances as an important element of its AIoT strategy. Xiaomi will focus on innovation and product design, offering intelligent user experiences and promoting the enhanced connectivity and compatibility of its smart home appliances.

For the six months ended June 30, 2019, the shipments of its air conditioners amounted to approximately 1 million units. At the same time, Xiaomi has also entered the smart kitchen appliances market.

In Q2 2019, Xiaomi continued to enrich its IoT product portfolio. The market share of its laptops has been steadily increasing following the launch of its new products. On May 28, 2019, the Redmi brand introduced its first 14” slim notebook and enjoyed widespread popularity.

According to IDC Consulting (Beijing), the market share of its laptops in mainland China in terms of shipments increased from 5.5% in the second quarter of 2018 to 8.7% in Q2 2019. Its Mi Band ranked 1st in the global wearables market in terms of shipments in the first quarter of 2019.

Meanwhile, the Mi Band 4 recorded shipments of more than 1 million units within 8 days of its launch on June 14, 2019. In addition, Xiaomi has also launched several new products, including its AI Translator “Xiao’Ai Teacher”, Mi Smart Door Lock and Mi Smart Combo Wash and Dryer Pro, which are supported by its AI assistant “Xiao’Ai”. These product launches illustrated its continuous
the pursuit of excellent product design and quality.

Xiaomi has continued to improve the device-to-device interaction and enhance its users’ smart home experience. For example, when a user opens the door through a Mi Smart Door Lock, its
AI assistant will welcome him/her home. At the same time, the Mi Air Purifier, Mi Air Conditioner, and other smart devices could be switched on automatically. The Mi Smart Combo Wash Dryer Pro can be operated by the voice control function through its AI assistant

Xiaomi Internet services

In the second quarter of 2019, its user base continued to expand. The MAU of MIUI rose by 34.7% year-over-year from 206.9 million in June 2018 to 278.7 million in June 2019. The MAU of MIUI in mainland China was 115.1 million in June 2019. The MAU of its smart TVs and Mi Box achieved 53.8% year-over-year growth, reaching 22.6 million in June 2019.

Revenue from its internet services segment grew by 15.7% year-over-year to RMB4.6 billion in Q2 2019. Advertising revenue slightly decreased by 0.6% year-over-year to RMB2.5 billion due to a soft mainland China advertising market, particularly due to reduced advertising spending from other internet companies which contributed a meaningful portion of its advertising revenue.

Over the course of the last few quarters, Xiaomi has continued executing its strategy to diversify its advertising customer base. Through expanding into more vertical industries, such as finance and small and medium-sized enterprises, Xiaomi is developing a more robust and healthy advertising business to capture more future growth.

Revenue from gaming decreased by 4.1% year-over-year to RMB675.1 million. However, its gaming gross profit increased to RMB408.2 million in Q2 2019 from RMB212.5 million in Q2 2018, representing an increase of 92.1%. Its gaming gross profit margin increased from 30.2% in Q2 2018 to 60.5% in Q2 2019 as Xiaomi optimized its gaming distribution and had higher gaming revenue growth from content providers with a high gross profit margin. Its other internet value-added services grew by 89.9% year-over-year to RMB1.4 billion, primarily due to the strong growth in revenue from its fintech business and Youpin e-commerce platform.

Introduction to Xiaomi’s e-commerce platform Youpin

Xiaomi has been focusing on enriching its internet services and content to strengthen its advertising business. Many of its internet services are leading on its smartphones, its Mi App Store, Mi Browser, Mi Security, and Mi Music ranked 1st and Mi Video ranked 2nd in their respective categories in mainland China in terms of MAU on its smartphones in June 2019.

Furthermore, its news feed service ranked 1st in terms of MAU on its smartphones in mainland China, reaching 71.0 million MAU in June 2019, representing a year-over-year increase of 31.0%. Its search service also ranked 1st on its smartphones in mainland China in terms of search query volume in the second quarter of 2019.

Xiaomi developed various entry points for its search function, including browser, negative one screen, launcher searchbox, and its AI assistant. Leveraging its increasingly diversified services and
multi-dimensional data, Xiaomi is able to further improve its algorithm and enhance its users’ experience. Services like news feed and search allow Xiaomi to diversify its advertising customer base.

Internet service revenue outside of advertising and gaming from mainland China smartphones, including those generated from the Youpin e-commerce platform, fintech business, TV internet services and overseas internet services, increased by 108.8% over the corresponding quarter in 2018, accounting for 36.0% of the total internet service revenue in the second quarter of 2019.

For the six months ended June 30, 2019, the gross merchandise volume (“GMV”) of its Youpin e-commerce platform grew to RMB3.8 billion, an increase of 113.9% YoY. In June 2019, more than 65% of Youpin’s GMV came from non-Xiaomi smartphone users.

Revenue from its fintech business increased to RMB792.0 million in Q2 2019, representing year-over-year growth of 62.7%. Its current fintech business focuses on consumer loans and supply chain financing. With its sophisticated risk management model and technology capability, and extensive user base and supply chain partners, Xiaomi had a solid business foundation and potential to grow. In the meanwhile, Xiaomi is also actively exploring other fintech business opportunities.

Its TV internet services are also fast-growing and increasingly diversified. TV internet services revenue is mainly generated from advertising, paid subscription, and app distribution. In June 2019, Xiaomi had over 3 million paid subscribers, representing a year-over-year increase of 83.1%. Xiaomi offers a variety of membership services, including video membership, sports memberships, and children membership. Its subscription services have expanded to other non- Xiaomi TVs to serve a wider user base.

Xiaomi’s Overseas markets

With the overseas expansion of its smartphone business, its overseas internet service revenue also increased significantly. Xiaomi continued to build and strengthen its service offerings in overseas markets. In June 2019, its browser ranked 1st among all browsers in India in terms of MAU on its smartphones. In the second quarter of 2019, the average revenue per user (“ARPU”) in overseas markets recorded a year-over-year increase of 133.0%.

Xiaomi has maintained strong growth in the overseas markets in the second quarter of 2019. Its revenue from the overseas markets grew 33.1% year-over-year to RMB21.9 billion in the second quarter of 2019.

Xiaomi will continue to build and expand its new retail channels in the overseas markets. As of June 30, 2019, there were a total of 520 Mi Home stores overseas, representing a 92.6% year-over-year growth, of which 79 stores were located in India. Furthermore, in India, Xiaomi had more than 1,790 Mi Stores that cater to tier two and rural areas of India as of June 30, 2019.

According to Canalys, in the second quarter of 2019, Xiaomi ranked among the top five in over 40 countries and regions in terms of smartphone shipments. According to IDC, its smartphones have ranked 1st in India in terms of shipments for eight consecutive quarters. In addition, according to Canalys, in Q2 2019, Xiaomi ranked 4th in terms of smartphone shipments for Western Europe, representing a year-over-year increase of 53.2%.

Xiaomi ranked 2nd in open market channels in Spain in terms of smartphone shipments in Q2 2019. Xiaomi has been developing operator channels in Europe. Its flagship smartphones, such as Mi MIX 3 and Mi 9 series, have been launched in operator channels in the United Kingdom, France, Spain, Italy, and Switzerland.

AIoT

In Q2 2019, Xiaomi continued the implementation of its “Smartphone + AIoT” dual-engine strategy and its AIoT platform continued to maintain its leading position. As of June 30, 2019, the number of connected IoT devices (excluding smartphones and laptops) on its IoT platform reached approximately 196 million units, representing a year-over-year increase of 69.5%.

The number of users who have five or more devices connected to Xiaomi’s IoT platform (excluding smartphones and laptops) increased to approximate 3 million, representing a year-over-year increase of 78.7%. In the six months ended June 30, 2019, the shipments of its AI speakers exceeded 4 million units.

In June 2019, its AI assistant had 49.9 million MAU, making it one of the most used AI voice interactive platforms in China. In June 2019, 45% of its AI speaker MAU used voice control to interact with their IoT devices at least once that month.

Xiaomi continued to open up its AIoT platform to build a more vibrant AIoT ecosystem. Its Mi Home app had 30.4 million MAU in the second quarter of 2019 and more than half of the MAU in mainland China were from non-Xiaomi smartphone users. Xiaomi will continue to invest in the development of its open AIoT platform to attract more third parties and users to join this AIoT platform.

The Group’s AIoT Strategy committee will further enhance the development of its AIoT technology, by building a comprehensive AIoT ecosystem, strengthening its research and development, and realizing synergies across business units to improve its smart devices’ connectivity and user experiences.

For example, Xiaomi continues to develop technologies for files to be seamlessly transferred between its smartphones and laptops, as well as for intelligent projection to be enabled between its smartphones and smart TVs.

Xiaomi’s Investments

As of June 30, 2019, Xiaomi invested in a total of over 270 companies with an aggregated book value of RMB28.7 billion, representing year-over-year growth of 20.8%. Xiaomi also expanded its investment into supply chain companies to strengthen its partnership with key component suppliers and to enhance its abilities in advanced technology sourcing and manufacturing.

As of the date of this announcement, Xiaomi invested in 12 supply chain companies. Among those, three of the investee companies were listed on the STAR Market in China. Xiaomi believes its investments not only allowed Xiaomi to establish close partnerships with the investee companies but also provided Xiaomi with recurring investment income.

In the second quarter of 2019, Xiaomi generated net gains on disposal of investments (after tax) of RMB551.8 million.

Xiaomi shipped 33.3 million units smartphones in Q3 2018, a 20,4% growth year-on-year. That recorded approximately US$5.04 billion in revenue, an increase of 36.1% year-on-year. Xiaomi Mi 8 ranked 1st in terms of sales volume on Singles’ Day shopping festival 2018. Xiaomi smartphone shipments for Western Europe grew 386% year-on-year and ranked fourth in terms of smartphone shipments in Q3 2018. The global sales volume of Xiaomi smart TVs grew 198.5% year-on-year for Q3 2018.

Xiaomi generated 50.8 billion yuan (US$7.31 bn) in revenue in Q3 2018, an increase of 49.1% year-on-year.

Revenue from international markets accounted for 43.9% of the total. Adjusted profit grew by 17.3% year-on-year to 2.9 billion yuan (US$417.58 mn). The IoT and lifestyle products segment experienced the fastest growth.

Xiaomi Smartphones

Xiaomi shipped over 100 million units smartphones for 2018 on October 26, 2018. Xiaomi smartphones recorded approximately 35.0 billion yuan (US$5.04 bn) in revenue for Q3 2018, an increase of 36.1% year-on-year. Smartphone sales volume reached 33.3 million units in Q3 2018, up 20.4% year-on-year.

Shipment of Xiaomi flagship Mi 8 series had reached 6 million units by October 9, 2018. During the Singles’ Day shopping festival in 2018, Xiaomi Mi 8 ranked 1st in terms of sales volume in the 2,000 yuan to 3,000 yuan price range in the smartphone category on Tmall.com and JD.com, as well as in the 2,000 yuan to 2,499 yuan price range in the smartphone category on Suning.com.

Xiaomi smartphone average selling price (ASP) in mainland China was 16% higher over Q3 2017 and was 4% higher over Q2 2018. The smartphone ASP outside mainland China also increased by 18%, which can be attributed to the increase in the proportion of shipments in Western Europe. The percentage of revenue from smartphones over 2,000 yuan accounted for 31% of total smartphones revenue in Q3 2018.

Xiaomi IoT and lifestyle products

Revenue of the IoT and lifestyle products segment increased by 89.8% year-on-year to 10.8 billion yuan in Q3 2018. This revenue increase was primarily due to a rapid growth in the sales of smart TVs. Besides that, laptops and several Xiaomi ecosystem products such as Mi Band and Mi Electric Scooter also experienced robust sales growth.

The global sales volume of Xiaomi smart TVs grew 198.5% year-on-year for Q3 2018. The global sales volume of Xiaomi smart TVs reached 5.2 million units in the first nine months of 2018. Xiaomi smart TVs monthly sales volume exceeded 1 million for the first time in October 2018.

During the Singles’ Day shopping festival in 2018, the sales volume and sales value of Xiaomi smart TVs both ranked 1st among all the TV brands on Tmall.com, JD.com, and Suning.com, respectively. Xiaomi launched its smart TVs in the India market in February 2018, which is now the leading smart TV brand in India, according to IDC Consulting (Beijing) Ltd. (“IDC”).

Xiaomi launched Mi Air Conditioner on July 23, 2018, which received positive reviews from users. There were about 1.98 million users who own more than five Xiaomi IoT devices as of September 2018, excluding smartphones and laptops, representing a quarter-on-quarter rise of 16.5%.

Internet services

Revenue from Xiaomi internet services segment grew 85.5% year-on-year to 4.7 billion yuan in Q3 2018. Advertising revenue grew by 109.8% year-on-year to 3.2 billion yuan. Revenue from internet value-added services also grew 49.7% year-on-year to 1.5 billion yuan, of which 652.5 million yuan were from gaming, a 12.0% year-on-year increase.

Revenue from other internet value-added services grew by 98.6% year-on-year to 892.7 million yuan, primarily due to an increase in revenue contribution from the internet finance business and Youpin e-commerce platform.

Monthly active users (“MAU”) of MIUI increased 43.4% from 156.5 million in September 2017 to 224.4 million in September 2018. The average revenue per MIUI user (“ARPU”) for the quarter under review increased by 29.4% year-on-year to 21.1 yuan.

Overseas internet services revenue accounted for 4.4% of Xiaomi’s total internet services revenue in Q3 2018. The MAU of Xiaomi Mi TV and Mi Box reached 15.9 million in September 2018. Xiaomi also saw a more significant contribution to internet services revenue from non-smartphone devices.

For example, TV internet services revenue accounted for 5.4% of its total internet services revenue in Q3 2018.

International markets

Xiaomi mainland China revenue grew 20.9% year-on-year to 28.5 billion yuan while international markets revenue grew 112.7% year-on-year to 22.3 billion yuan in Q3 2018. Revenue from international markets accounted for 43.9% of the total in Q3 2018.

Xiaomi smartphone shipments for Western Europe grew 386% year-on-year and ranked fourth in terms of smartphone shipments in Q3 2018, according to Canalys.

Xiaomi smartphone shipments for India grew 31% year-on-year in Q3 2018 and achieved the number one market share position in terms of shipments for four consecutive quarters, according to Canalys. Furthermore, Xiaomi recorded orders of more than 6 million smartphones and orders of more than US$1 billion for all of its products for the Diwali Festival in India this year, during the period from October 9, 2018 to November 8, 2018.

In Indonesia, Xiaomi ranked second in terms of smartphone shipments with year-on-year growth of 337%. It also ranked top five in the smartphone markets of 30 countries and regions in terms of shipments in Q3 2018, according to Canalys.

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Other business highlights

AI+IOT

Artificial intelligence (“AI”) + IoT forms one of Xiaomi’s core strategies. Xiaomi AI assistant (“小愛同學”) had more than 34 million MAU, making it one of the most used AI voice interactive platforms in mainland China as of September 2018.

At the World Internet Conference in November 2018, Xiaomi’s AI Open Platform for Smart Homes won the “World Leading Internet Scientific and Technological Achievements” award. At the 2018 China Big Data Industry Ecology Conference, Xiaomi was selected as one of the “Top 50 Chinese Big Data Enterprises”.

At the third AI WORLD 2018 World Artificial Intelligence Summit, Xiaomi was selected as one of the “TOP 10 AI Leading Enterprises in China”. At the 2018 World Artificial Intelligence Conference, Xiaomi AI assistant (“ 小愛同學 ”) was shortlisted for the SAIL Award, the conference’s most prestigious award.

During the third quarter of 2018, Xiaomi announced that Mobile AI Bench, its end-to-end benchmark tool for hardware and neural network frameworks testing on mobile devices, would become a fully open source platform. Empowered by AI, Xiaomi’s IoT platform continues to grow and maintain a leading position in the industry.

The number of connected IoT devices (excluding smartphones and laptops) on Xiaomi’s IoT platform reached approximately 132 million units as of the end of Q3 2018, an increase of 13.8% from the previous quarter.

Efficiency

Xiaomi had 499 Mi Homes in mainland China as of September 30, 2018, mainly in first- and second-tier cities. Moreover, to further penetrate lower-tier cities and rural areas of China, Xiaomi had more than 1,100 authorized stores in total by the end of Q3 2018, compared with more than 360 authorized stores in Q2 2018.

Despite the rapid expansion of its offline channels, Xiaomi’s overall operation remained highly efficient with the operating expense ratio at 8.5% for Q3  2018.

Brand Strategy

Xiaomi launched POCO, a new smartphone brand. The POCO smartphone, first released in India on August 22, 2018, is now available in most of Xiao’s international markets and is widely popular among tech enthusiasts.

It also launched a gaming smartphone brand, Black Shark, through one of its investee companies. Black Shark brings together powerful hardware, cutting-edge innovation, refined build and design, polished software, and gamer-centric services to deliver the ultimate gaming experience to users.

On November 19, 2018, Xiaomi and Meitu, Inc. (“Meitu”) entered into a strategic cooperation agreement in relation to, among others, the exclusive global license of the Meitu brand and global license of certain technologies and domain names in relation to all future Meitu branded smartphones under the cooperation and certain smart hardware products.

Through this strategic partnership, Meitu’s image-related algorithms and technologies can help Xiaomi to provide better photographic experiences to its users. At the same time, the strength of Meitu’s brand among females can also help Xiaomi continue to expand and diversify its user base.

Insights of China internet users in lower-tier cities

Chinese consumers are spendgin more time on digital media in recent years with more smart devices coming into their lives.

Related: China adults spend more time in digital media in 2016

In terms of VOD (Video-on-demand) and playback behavior, users’ duration of watching live TV programs in a week on DVB (Digital Video Broadcasting) reaches 12.6 hours according to a research from Miaozhen Systems. Although VOD/Playback function has led to a slight decrease of live duration, it still brings a lot of extra increase to the total duration.

In terms of regions, the penetration rate of smart TV is highest in Yunnan province (48%), followed by Shaanxi province (47%).

The penetration rate of smart TV in China’s second-tier cities reached 42%, the highest among other city tiers.

The 30 to 34 age group has a penetration rate of 40%, lower than other groups of people except the groups of people over 45 years old.

In China, 77% families with 30 to 34 years-old parents have VOD/Playback devices, which shows that the 30 to 34 y-o groups are primary consumers of current phablet TV market and will be a driving force of the smart TV market in the future.

In China, the smart TV market has the penetration rate with over 40%  of users under 44 years old while phablet TV market has the penetration rate of about 35% but 41% in age group 30 to 34 y-o.

Over 80% users use wi-fi to connect the internet cross all ages, more than that of using data on smartphones (75% overall); 51% of mobile users use 4G on their smartphone.

58% Chinses users know little about mobile audio.

85% of Chinese users are very/somewhat satisfied with mobile audio; of which, 30% users are very satisfied, higher than that of traditional radio.

59% of respondents say they stick on and will use mobile audio frequently; only 17% respondents will use traditional radio frequently.

A smart TV device is either a television set with integrated Internet capabilities or a set-top box (STB) for television that offers more advanced computing ability and connectivity than a contemporary basic television set. Video is the main function for smart TV users. At present, game apps development are not so active as video ones.

The essential reasons can be as follows:

1. It is still unclear about how to pay for paid game apps.
2. It is hard to integrate different kinds of hardware (Television, STB).
3. Since smart STB is a new product, it still needs to be improved. There is limitation when a large game is running.

Compared with H2 2013, downloads of video apps on China smart TV decreased by 11.1%. With increase of smart TV users in the future, game developers are going to devote into more smart TV game apps. It is estimated that downloads will increase to 30% in 2 years.

In H1 2014, Downloads of education apps incresed by 1.3% from H2 2013. Online education market is on its early stage and its development on desktop and mobile device is not so popluar in China. Smart TV has its own advantage, big screen, large room in sitting room, so it is estimated education apps downloads will increase to 10%.

Video apps accounts for 55% in future smart TV apps, which shows they will still have great potential in smart TV app market.

With video sites’ standardization and operators’ enhanced awareness about copyright, paid video app is gradually accepted by users. As post-80s in China are concerned about educating their children, in the future, parents are willing to pay expenditure on education.

Games, education and video apps are top 3 ones, accounting for 75.1%.

Youku, iQiyi and 91VST were top three video on demand apps on China smart TV by total downloads in H1 2014.

In H1 2014, Togic ranked top among live TV video apps on China smart TV by total downloads, followed by Kantv and TVapk.

Also read: CHART: China Smartphone Mobile Gaming Users