Like other brands, Xiaomi has faced many difficulties caused by Covid-19. Global Mi Store and Mi Home stores had to close soon, production was delayed, its latest flagship model, the Mi 10, had to launch online instead of at a private event. In the second quarter, the number of smartphones shipped also decreased by 3 million units, to 28 million units.
But facing this adversity, Xiaomi has recently announced extremely bright business results for the first 6 months of the year. Shares of Tieu Me also continued to rise in price, demonstrating the growing confidence of investors. So, in the midst of all the difficulties – even declining phone sales, what is the key to “Apple China”?
Xiaomi phones are getting more and more expensive
With the starting price increased to 600 – 800 USD, the main product line of Xiaomi has given up the role of “configuration devaluation” in the past.
In the recent Xiaomi financial report there is quite a special information: ASP (the average price that users spend to buy Xiaomi phones) has increased by 11.8%. This figure means that, from being a dumping brand, Xiaomi is gradually moving towards the positioning of Samsung and Apple: selling more expensive phones to maximize profits.
The price of the newly launched Mi 10 is the clearest proof of this ambition of Xiaomi. Even in China – which is a cheaper market than foreign markets, the regular Mi 10 starts at $ 600. This price allows Mi 10 to become the first Mi to be released in the high-end segment, instead of the mid-end segment as always.
The special version of the recently launched Mi 10, the Mi 10 Ultra, is even priced at nearly $ 800, which is more expensive than the iPhone 11. Apparently, Xiaomi has changed a lot compared to the time of emerging. In the international market – the Mi 3 or Mi 4 all start at just over 300 USD.
Mid-range and high-end smartphones account for an increasing share of Xiaomi sales.
The price increase is exactly what investors have called for Xiaomi two years ago, when it launched an IPO on the Hong Kong Stock Exchange. In the past, Xiaomi has always claimed to profit less than 5% from phone hardware. It is not clear whether this promise will still be fulfilled (not mentioned in the latest financial report), but it is clear that the decision to STOP devaluing the configuration helped Xiaomi to double net profit in Q2. ! Profits increased, long-term outlook improved – obviously the support from investors was also evident.
Unexpected help from … Donald Trump
In fact, Xiaomi’s unexpected success has contributed significantly from the US-China trade war. With Huawei being the sole focus of this war, Xiaomi has become the substitute for “countryman” in international markets.
According to company data, the number of Xiaomi smartphones shipped in Europe has increased 65% year-on-year. Previously, Canalys data also showed that Xiaomi had replaced Huawei to take the No. 3 position at “Continent of the Old”, second only to Samsung and Apple. Thus, the successes Huawei created with the Mate series or the P series in the past are gradually being wiped out. Users looking for Chinese smartphones are turning to Xiaomi. Considering that Europe is a developed economy, people can afford to pay higher than China or India, it is completely easy for Xiaomi to increase the average selling price (and thus profit). understand.
The number 3 spot in Europe now belongs to Huawei.
The report also confirmed that Xiaomi has grown in all markets except China and India. Even the decline in sales in India is completely understandable, as factories are struggling to cope with Covid-19, causing output to decline. Xiaomi’s 48% decline also coincides with the overall decline in this market. In China, Xiaomi – as well as other names Vivo and Oppo – are struggling with The Huawei fever caused by the trade war.
But China has long ceased to be a key market for Xiaomi. Trading market share in China in exchange for foothold in hot growing markets like India or high-end markets like Europe is perfectly reasonable trade-off. Not to mention, ahead Xiaomi (and other manufacturers) is the 5G revolution, promising abundant revenue streams when users upgrade their phones to enjoy new connection speeds.
With no more devaluation, Xiaomi is waiting for a brighter future ahead.
In the final days of August, Xiaomi’s shares surpassed HKD21.45. After 2 years of struggling, this is the first time “Apple of China” can exceed the milestone of stock value when IPO. This event shows that investors’ perspectives towards Xiaomi are different. The outlook for Little Rice is also very different now: from a “burning money” machine, Xiaomi is gradually becoming a profitable company.