In Q2 2018, Xiaomi reported a high growth of 58.7% in smartphone revenues to 30.5 billion yuan (US$4.61 bn), accounting for roughly two-thirds of the total revenues. Smartphone sales volume reached 32.0 million units, up by 43.9% year-on-year. IoT and lifestyle products grew 104.3% year-on-year in revenues with the global sales volume of smart TVs grew over 350% year-on-year.
Xiaomi achieved 45.2 billion yuan (US$6.82 bn) in revenue, representing a growth of 68.3% year-on-year. Adjusted profit grew 25.1% to 2.1 billion yuan (US$317.1 mn) year-on-year, according to its first results as a public company since its IPO in July.
Smartphone
The smartphones segment recorded approximately 30.5 billion yuan in revenues for Q2 2018, representing year-on-year growth of 58.7%. This growth was driven by an increase in both sales volume and the average selling price (“ASP”). Smartphone sales volume reached 32.0 million units, up 43.9% on a year-on-year basis. Xiaomi is the fastest growing amongst the top five mobile phone companies globally, according to IDC.
In China, Xiaomi’s strategic focus for 2018 is to expand into the high-end smartphone market. Its smartphone ASP in mainland China increased over 25% year-on-year in Q2 2018. Its flagship phone series, Mi 8, which has an average ASP above 2,000 yuan (US$301.98), sold over 1.1 million units in the first month of sales.
IoT and lifestyle products
The IoT and lifestyle products segment grew 104.3% year-on-year in revenue to 10.4 billion yuan (US$1.57 bn) for Q2 2018. Global sales volume of smart TVs grew over 350% year-on-year in this quarter. Xiaomi became the No.1 TV brand in mainland China in Q2 2018. The smart TV was also launched in the India market in February 2018.
Xiaomi also continued to launch innovative IoT products, such as the Mi VR Standalone headset that it co-developed with Oculus, and Mi Band 3, which features a large touchscreen, 50-meter water resistance and battery life of up to 20 days. Mi VR Standalone headset was named one of the best inventions of 2017 by Time Magazine.
As of the end of Q2 2018, Xiaomi had about 115 million connected Xiaomi IoT devices, excluding smartphones and laptops, an increase of 15% quarter-on-quarter. There are close to 1.7 million users who own more than five Xiaomi IoT devices, excluding smartphones and laptops, increased by 19% quarter-on-quarter.
Internet services
Revenue from the internet services segment grew 63.6% year-on-year to 4.0 billion yuan (US$603.95 mn) in Q2 2018, driven primarily by increasing monetization in mainland China. Advertising revenue grew 69.6% year-on-year to 2.5 billion yuan (US$377.47 mn) driven by continued optimization of its recommendation algorithm and increased advertising spending from customers.
Revenue from internet value-added services also grew 54.1% year-on-year to 1.5 billion yuan (US$226.48 mn). Within internet value-added services, revenue from gaming accounted for 703.9 million yuan (US$106.28 mn), growing 25.5% year-on-year.
Monthly active users (“MAU”) of MIUI increased 41.7% from 146.0 million in June 2017 to 206.9 million in June 2018, driven by increasing smartphone sales volume and user adoption.
Average revenue per user (“ARPU”) this quarter increased 15.4% year-on-year to 19.1 yuan (US$2.88). Up until the end of Q2 2018, the internet services revenue was primarily generated in mainland China.
Artificial intelligence (“AI”) technology is a core part of Xiaomi’s strategy. Its AI assistant (” 小愛同學 “) won the “2018 Leading Scientific and Technological Achievement Award — Cool Technologies” and “2018 Leading Scientific and Technological Achievement Award — New Product” awards at the China International Big Data Industry Expo held in May 2018.
As of July 2018, its AI assistant (“小愛同學”) MAU exceeded 30 million. The AI speaker has accumulated over 2 billion activations within the first year of its launch.
To promote the development of the AI industry, in June 2018, Xiaomi announced that its Mobile AI Compute Engine (“MACE”), a prediction framework for a deep learning model optimized for mobile devices, would become a fully open source platform.
Using MACE, developers can more quickly and efficiently develop AI applications on mobile devices and significantly enhance the user experience of these applications. At present, application scenarios covered by MACE include scene recognition, image super-resolution, image stylization processing, intelligent speech, intelligent translation, etc.
International markets
Xiaomi’s international revenue grew 151.7% year-on-year to 16.4 billion yuan (US$2.48 bn), accounting for 36.3% of its total revenue.
Its smartphones continued to experience rapid growth in the Indian market and ranked first in terms of market share by shipment in Q2 2018, according to Canalys.
In Indonesia, Xiaomi also recorded impressive growth and ranked No.2 in terms of smartphone shipments in Q2 2018. In the Western Europe market, Xiaomi expanded into France and Italy in May 2018. Smartphone shipments in Western Europe grew over 2700% year-on-year. As of Q2 2018, Xiaomi was ranked top five in the smartphone markets in 25 countries and regions, according to Canalys.
Expansion of offline channels
As of June 30, 2018, Xiaomi Corporation had more than 400 Mi Homes in mainland China, mainly in first- and second-tier cities. To penetrate more rural parts of China, by the end of Q2 2018, Xiaomi had over 360 authorized stores and also had built a direct supply network covering more than 37,000 locations, spread across over 30 provinces, over 300 cities and over 2,500 towns.
In India, its offline smartphone sales achieved a market share of over 20% and ranked No 1. in 8 cities in Q2 2018, according to GFK. Its overall operation remained highly efficient with an operating expense ratio of 8.8% for Q2 2018.