The mobile phone market continues to decline, while Xiaomi continues to reduce costs and increase efficiency

On the evening of May 24th, Xiaomi Group released its first quarter financial report for 2023. Affected by the overall decline in the mobile phone market, Xiaomi's revenue in this quarter decreased from 73.4 billion yuan in the same period last year to 59.5 billion yuan, a year-on-year decrease of 18.9%.

However, thanks to continuous cost reduction and efficiency increase, as well as a decline in storage and panel prices, Xiaomi's net profit reached 3.2 billion yuan in this quarter, a year-on-year increase of 13% and a month on month increase of 121%. Its gross profit margin rose from 17.3% a year ago to 19.5%, setting a new historical high.

It is also worth noting that the inventory level of Xiaomi has continued to improve this quarter, with three consecutive quarters of decline. Currently, the overall inventory amount is 42.6 billion yuan, a year-on-year decrease of over 24%, reaching the lowest level in more than two years.

One of the costs of reducing inventory is a further decrease in the average selling price (ASP) of Xiaomi smartphones, from 1188.5 yuan in the same period last year to 1151.6 yuan. The main reason is that overseas markets have reduced prices to clear inventory.

However, the domestic market has benefited significantly from the high-end strategy, especially the strong price of the Xiaomi 13 series, which has led to a significant increase in Xiaomi's ASP. According to the financial report, Xiaomi's ASP in China increased by 18% year-on-year this quarter, reaching a new high in a single season.

At the end of last year, Xiaomi released the high-end model Xiaomi 13 series. The success of this model helped Xiaomi win the first place in Android sales in the domestic price range of 4000 to 5000 yuan in the first quarter, with a market share increase of 7.7% to 24.1% year-on-year.

The strong price of the Xiaomi 13 series has to some extent increased the gross profit margin of the domestic mobile phone business, and it was not until the 618 that the first official price reduction occurred, with a price reduction of 300 yuan. As a comparison, the iPhone 14 series released in September last year saw a significant price reduction of over 1000 yuan at the beginning of this year, with the iPhone 14 ProMax experiencing a maximum price reduction of 2000 yuan.

In addition, the success of the Xiaomi 13 series has to some extent boosted the consolidation of Xiaomi's offline channels. According to financial reports, in the first quarter of this year, the offline channel GMV of Xiaomi smartphones achieved double growth on a month on month basis. As of May 17, over 55% of the sales of Xiaomi 13 series and Xiaomi 13 Ultra came from offline sources.

But for Xiaomi, the challenges in the entire mobile phone market are still severe. According to Canalys data, global smartphone shipments fell by 13.3% year-on-year in this quarter, which is a further decline from the previous year's decline and directly sets the lowest first quarter shipment volume since 2014.

Among the five mainstream mobile phone manufacturers, only Apple achieved a slight growth of 3%, while other manufacturers saw a year-on-year decline in their shipments. Among them, Xiaomi's shipments decreased by 22% year-on-year, with a market share of about 11.3%, but still ranked third in the world.

Not only has Xiaomi's revenue declined, but the overall weakness of the mobile phone market has caused direct pressure on the revenue of major manufacturers. Just last month, OPPO announced the dissolution of its chip team, Zheku. At the final staff meeting, Zheku CEO Liu Jun stated that the global economy and the mobile phone industry are currently extremely pessimistic, and the company's revenue is far from meeting expectations, making it unable to afford such a huge investment in chips.

In addition to being high-end, Xiaomi is also continuously promoting cost reduction and efficiency improvement. The financial report shows that the overall expenses of Xiaomi Group for this quarter were 9.4 billion yuan, a year-on-year decrease of 6.4%. However, Xiaomi's research and development investment is still steadily increasing, from 3.5 billion yuan in the first quarter of last year to 4.1 billion yuan in the first quarter of this year, a year-on-year increase of 17.7%.

In addition to the mobile phone business, during the financial report conference held on the evening of May 24th, Xiaomi President Lu Weibing also discussed the latest progress of Xiaomi Motors, stating that Xiaomi Motors has slightly exceeded expectations and is scheduled to conduct winter and summer tests this year to verify whether the production of vehicles meets the standards.

But like the mobile phone market, the uncertainty in the new energy vehicle market is also increasing, and several new car manufacturers have exploded this year. Even in the first tier, taking NIO and Xiaopeng as examples, both shipments have fallen behind this year, with a significant market reshuffle effect. Xiaomi Motors is expected to officially launch in 2024, and the competitive pressure it faces will further increase.

(Text | Edited by Zeng Guang | Dong Yuqing)