Author/Lv Qian

On May 19, Xiaomi Group released its earnings for the first quarter of 2022. Data showed that xiaomi achieved revenue of 73.35 billion yuan in the first quarter, down 4.6% year on year; Recorded a loss of $500 million compared with a profit of $7.8 billion in the same period last year; Adjusted net profit fell 52.9 percent to 2.9 billion yuan from 6.1 billion yuan a year earlier. Xiaomi closed at HK $11.08 today, down 4.97%, giving it a total market value of HK $277.2 billion.

Wang Xiang, president of Xiaomi, said on the earnings call that the epidemic has had a great impact on production and logistics, and the combination of the epidemic and offline store closures in Shanghai has affected consumers' desire to buy. Xiaomi is an international company, and the impact of the epidemic will eventually be reflected in its global business, which will also cause difficulties in improving performance. However, we are confident that the epidemic will eventually pass.

In addition, Wang Xiang said that there are a lot of uncertainties in the current economic situation, the epidemic situation and the international situation, and the challenges in the first quarter are mainly the epidemic mutation and chip supply. It is expected that there will be no problem in the supply of global semiconductors in 2022, and there will even be surplus. The severe chip shortage in the second quarter will gradually improve, but this also depends on the development of the epidemic and changes in the international situation.

Revenue at Xiaomi's smartphone division fell 11.1 percent to 45.8 billion yuan in the quarter from 51.5 billion yuan in the same period last year, mainly due to a decline in smartphone shipments, partially offset by a rise in average smartphone selling price (" ASP "), according to the results. Smartphone shipments decreased 22.1 percent to 38.5 million units from 49.4 million units in the first quarter of 2021, mainly due to continued supply shortages of core components, repeated COVID-19 outbreaks and the global macroeconomic environment.

Canalys' latest report noted that global smartphone shipments fell 11 percent year-on-year, keeping Xiaomi in third place, due to unfavorable economic conditions and weak seasonal demand in the first quarter of 2022. According to the China market share report for the first quarter of 2022, Xiaomi fell to fifth place with 10.2 million units shipped, an annual growth rate of -22%.

The ASP of Xiaomi's smartphones increased 14.1 percent to 1188.5 yuan in the quarter from 1042.1 yuan in the first quarter of 2021, mainly due to the increase in the proportion of mid - and high-end smartphone shipments in total smartphone shipments, the earnings report showed. In addition, smartphone segment gross margin declined to 9.9% from 12.9% in the first quarter of 2021, mainly due to promotions on several smartphone models.

According to gross margin problem, millet group CFO shih-wei Lin explained that in the first quarter of last year is mainly due to the shortage problem, the company did not do too much product promotion, lead to higher gross profit margins, and in the first quarter of this year data is restored to normal level, and in the fourth quarter of last year's data is close to, and millet in cleaning up old inventory, alleviate the lack of core and rhythm, Hope to continue to maintain a healthy gross margin this year.

Separately, revenue at Xiaomi's IoT and consumer products division rose 6.8 percent to 19.5 billion yuan in the quarter from 18.2 billion yuan a year earlier, mainly due to higher sales in mainland China. The increase in sales in the Chinese mainland was due to the widespread popularity of Xiaomi's Tablet 5 series, which will be launched in August 2021, as well as increased sales in the smart Home category. The segment's gross margin rose to 15.6% from 14.5% in the first quarter of 2021, mainly due to lower prices of core components such as display panels.

Internet Services segment revenue increased 8.2% to HK $7.1 billion from HK $6.6 billion in the first quarter of 2021, mainly due to an increase in advertising revenue. With the continuous growth of Xiaomi's overseas Internet users, overseas Internet service revenue increased by 71.1% to 1.6 billion yuan from 900 million yuan in the first quarter of 2021. The segment's gross margin decreased to 70.8% from 72.4% in the first quarter of 2021, mainly due to higher percentages of certain advertising businesses with lower gross margins.

Xiaomi's revenue from overseas markets reached 37.5 billion yuan in the quarter, accounting for 51.1 percent of total revenue. 'The shortage of low-end chips has a big impact in overseas markets, including India and Europe,' Mr. Wang said. A shortage of 4G chips has taken its toll, leaving Xiaomi short of more than 10 million models under $150. In the second quarter, we should see the inflation and economic development in the global market, and then make a judgment on the future.

Xiaomi's R&D expenditure rose 16.0 percent to 3.5 billion yuan in the quarter from 3 billion yuan in the first quarter of 2021, mainly due to higher r&d staff compensation and spending related to innovative businesses such as smart electric vehicles. The investment income segment changed to a net loss of 201.3 million yuan from a net income of 9.0 million yuan in the same period last year, mainly due to losses of several investee companies such as iQIYI, Inc. (NASDAQ: IQ) and Beijing Jinshan Cloud Network Technology Co., LTD. (NASDAQ: KC).

Earlier, Indian law enforcement agencies accused Chinese tech company Xiaomi of violating the country's foreign exchange control laws by freezing some 55.5 billion rupees (4.8 billion yuan) in funds for illegal remittance of royalties to foreign entities, among other things. In response, Wang Xiang said that Xiaomi India has always adhered to legal and compliance operations, and will continue to maintain candid communication with The Indian side, hoping to reach a consensus. Xiaomi India has also made personnel adjustments, hoping to better cope with the situation.