Image source @ Visual China
Wen | Photon Planet, written by Wu Xianzhi |, and edited by Wang Pan |
After hours on March 22, Beijing time, Xiaomi Group released the fourth quarter and annual financial report of last year, achieving revenue of 85.58 billion yuan in 2021, an increase of 21.4% compared with 2020.
Photon Planet noted that since the third quarter of last year, Xiaomi's revenue growth has slowed down significantly. The main reason is that the new xiaomi mobile phone products are concentrated in the first and fourth quarters, and the release of the wrong peak with friends, coupled with Apple's big performance card, resulting in the second half of the year can not continue the strength of the first half of the year.
From 2020 to the beginning of 2021, Xiaomi concentrated on first- and second-tier cities to adopt the "Thousand Stores Plan" of self-built and direct operation, which quickly pushed up the cost of sales. With the end of the Thousand Stores Plan, costs will be effectively controlled. Last year, Lu Weibing sacrificed the "Wandian Plan" for the sinking market, expanding through authorized asset-light methods, with limited impact on future costs.
Even if the revenue has declined, relying on the Wandian plan and high-end transformation, it is still possible to maintain a more optimistic attitude towards the growth of Xiaomi's gross profit. At present, the discussion of whether the high-end is successful does not seem to be the most important thing, and what really needs attention is that the high-end of the mobile phone is deeply changing the revenue structure of Xiaomi.
In the past, taking hardware as the starting point, software service realization has always been Lei Jun's ideal profit model, and the financial report data reflects that the gross profit margin of Xiaomi hardware products is getting higher and higher, which is contrary to Internet companies. In terms of software, we see that the growing monthly active data has never brought Xiaomi a matching income.
Rice noodles can't be bought?
MIUI users and Xiao Ai classmates monthly active is the premise of Xiaomi's softening.
As of the end of last year, MIUI users monthly active users of 508.9 million people, an increase of 28% year-on-year, Xiaoai classmates monthly active monthly activities of 107 million people, an increase of 23% year-on-year, the two key indicators maintained rapid growth, indicating that Xiaomi relies on hardware to obtain customers Logic without any problems.
However, if combined with revenue metrics, it's easy to see that user and interaction continue to grow, but it doesn't bring some growth to revenue. On the one hand, the overall unit price of hardware is not high enough, and on the other hand, Internet services do not effectively convert users.
MIUI monthly active is closely related to mobile phone revenue, and Xiao Ai students reflect more on how much monetization power IoT devices have. Further analysis can be found that Xiaomi is not only continuing to harden, but also under the high-end strategy, the consumption enthusiasm of rice noodles is somewhat inferior to that of new users.
In the four quarters of last year, the monthly net growth of MIUI was 29 million, 28.5 million, 32.1 million and 23 million, with a growth rate of 28.6%, 32.1%, 32% and 28% respectively, in the case of Internet penetration rate has already touched the ceiling, with the global layout, Xiaomi MIUI monthly active users still maintain a fairly strong growth.
Under normal circumstances, mi fan buys a mobile phone, will not change the new user data of MIUI, unless the user forgets the password and cannot retrieve it. On the contrary, adding a Xiaomi mobile phone user is equivalent to pulling a new MIUI user. From this logic, the number of users and mobile phone sales in a single quarter can be net increased from MIUI in a single quarter, and the repurchase rate of Xiaomi can be calculated.
Combing through the data of the past two years, it is not difficult to find that the second quarter is the time node with the highest repurchase rate of Xiaomi mobile phones, and the repurchase rate in the second half of the year is significantly lower.
On February 13, 2020, Xiaomi 10 was officially released, and on March 29, 2021, the Mi 11 Pro and Mi 11 Ultra were released, and Mi Noodles contributed nearly half of the revenue. It should be pointed out that although the release time is in the first quarter, there is a certain delay in large-scale delivery, and the revenue is concentrated in the second quarter, which boosts the repurchase rate.
After the release of the new machine, the pull on revenue is very obvious, and Photon Planet has previously learned from several Xiaomi direct store sales staff that the purchase frequency of rice noodles for peripheral products is obviously much higher than that of new users. In contrast, the pull of the tablet on other products is not so obvious. According to a salesperson, a considerable number of users do not use Xiaomi mobile phones, and their interest in other products is not strong.
Further analysis of the repurchase rate reveals other changes.
In the first and fourth quarters of that year, due to the lack of new machine release stimulation, the repurchase rate fell into a trough, and in October of that year, the Xiaomi 10 Supreme Edition, which undertook the impact on the high-end and the tenth anniversary, was released, and the repurchase rate was not as good as in the second and third quarters. The situation in the third quarter of 2021 was similar, during which Xiaomi did not have new machines released, and the repurchase rate fluctuated, 26.9% respectively, a new low in the past three years.
Thankfully, the repurchase rate picked up in the fourth quarter of last year, probably partly because xiaomi 12 is about to go public, the cost-effective strategy of high-end models such as mi 11 and 11ultra, and the double 11 promotion, which has pulled back rice noodles.
Reducing the repurchase rate is a mixed blessing. The advantage is that Xiaomi's high-end is not without results, at least in the short term, it has been helped by rice noodles, and it has won some new users for a long time. The disadvantage is that the impact of rice noodles on xiaomi's high-end is continuing to weaken, and if the per capita consumption of MIUI is not good, it may also mean that hardware customers have not been converted to software and services.
It should be pointed out here that under the strategy of mobile phone × IoT, Xiaomi is not simply from "hard" to "soft", ideally, users will first buy Xiaomi mobile phones, then spread to IoT devices and ecological chain products, and finally to the software service business to achieve conversion. According to this logic, the per capita mobile phone consumption will be related to the per capita IoT and per capita Internet service consumption.
In the past two years and eight quarters, the per capita consumption amount of MIUI users hovered between 150-200 yuan, specific to mobile phones, per capita consumption was around 100 yuan, and there was a decline in the past two quarters, which indirectly corroborated the problem that the mobile phone repurchase rate was not high.
In addition, high-end seems to have a limited boost to mobile PHONE ASP (per capita consumption).
Mobile ASP is the core indicator of observing the high-end of Xiaomi, as of the fourth quarter of last year, Xiaomi ASP was 1143.6 yuan, an increase of 13.3% year-on-year. It is worth noting that the second quarter of the last two years is the peak of Xiaomi ASP, which completely coincides with the peak of the repurchase rate, indicating that the promotion of ASP can not rely on new users, but can only rely on rice noodles.
However, as will be mentioned later, the per capita consumption of the three major business sectors continues to decline, either the influx of new users or the lack of consumption power of old users.
The three quarters with the highest repurchase rate in the past three years were Q3 2019 with a repurchase rate of 59.8%, Q2 2020 with a repurchase rate of 54.8%, and q2 with a repurchase rate of 46.1% in 2021. Intuitively, the peak repurchase rate is getting lower and lower every year, indicating that the high-end, to be precise, the price increase has suppressed the purchasing power of some rice noodles.
High-end, let Xiaomi further harden?
Mobile phone and IoT revenue accounted for more than 80% of the long-term scale, and after the high-end in 2021, the proportion of revenue of the two major hardware businesses continued to expand. It is an indisputable fact that Xiaomi is becoming more and more "hard".
In the fourth quarter, Xiaomi's mobile phone business achieved revenue of 50.5 billion yuan, an increase of 18.4% year-on-year, and IoT revenue of 251 yuan, an increase of 19.1% year-on-year, and the weight of the two in total revenue was as high as 88.3%, accounting for 89.2% of the annual revenue. It is worth mentioning that the mobile phone business revenue has a huge traction on the overall revenue, but it is not much different from the Internet service in terms of gross profit margin.
This is also the result of Xiaomi's efforts to the high-end market.
For the whole of last year, the gross profit of mobile phones was 24.86 billion yuan, an increase of 88.3% year-on-year, contributing 42.7% of the gross profit, and the gross profit of Internet services was 20.9 billion yuan, an increase of 42.7% year-on-year, contributing 35.9% of the gross profit.
According to the razor principle, it can be roughly believed that mobile phone revenue determines the scale, Internet services determine profitability, and IoT plays an intermediary role, avoiding the embarrassment of increasing revenue and not increasing profits, and also hedging some of the risk factors brought about by strong Internet supervision. However, the high-end strategy is revising the above view.
Logically, high-end should make the hardened millet more marginal, but we saw that last year, the domestic Internet industry was crying everywhere, and millet was also doomed. The candlestick chart that has fallen endlessly is like investors calling on Lei Jun to return to the next stock trading software.
An intrinsic reason for the decline in the stock price is that the market believes that Xiaomi hardware and MIUI ecology are not as ideal, with sustained and stable liquidity, due to the shrinking mobile phone market, competition is becoming more and more fierce, it is naturally impossible to give a high valuation.
For example, the development of the IoT business over the years has become somewhat mediocre. Last year, the Full Year IoT achieved revenue of 85 billion yuan, an increase of 26% year-on-year, accounting for a slightly expanded proportion of revenue. Gross profit was 11.1 billion yuan, an increase of 29% year-on-year, and the performance was decent.
Once upon a time, Xiaomi could contribute to explosive smart devices every year, but in recent years it has been mediocre, coupled with the vacillation of the IoT strategy, the ecological chain enterprises have been independent, and the per capita IoT consumption has hovered around 40 yuan. Especially in the case of the big sale of Xiaomi tablets last year, per capita consumption did not rise but fell, which shows that users who buy IoT products are not MIUI users, which means that they are not Xiaomi mobile phone users.
In addition to the lack of explosive models, some products have declined to varying degrees due to the epidemic and the downturn in the electronic consumer market. For example, smart TV sales, which declined for four consecutive quarters from the fourth quarter of 2020 to the third quarter of 2021, finally increased in the fourth quarter. Global shipments reached 4.2 million units in the quarter, up 23.5% year-on-year.
The situation that Xiaomi is stronger than soft, and the rapid growth of MIUI users has made per capita quarterly consumption continue to decline. In the four quarters of last year, the per capita consumption of MIUI was 179.4 yuan, 172.7 yuan, 156.4 yuan and 162.8 yuan, respectively, and the last six quarters showed a downward trend. Part of the reason is the decline in the domestic electronics consumer market, especially the mobile phone industry.
Another reason is that mobile phones - IoT and ecological chain products - Internet service consumption, the three links have not produced obvious deferral effects. To be precise, high-end is making Xiaomi users have a significant split. The price increase of the flagship machine has suppressed the desire of rice noodles to consume mobile phones, while new users who buy mobile phones do not spend money to buy IoT and ecological chain products like rice noodles, let alone buy Internet services.
The above problems have also led to the divergence of miui growth rate and per capita consumption growth rate. There is a ceiling for the growth of user scale, so xiaomi seems to need to think about how to change the situation of poor per capita consumption. After all, in the case of the high-end of mobile phones, if it cannot effectively stimulate the income of the two major sectors of IoT and Internet services, the further decline in per capita consumption may restrict the high-end of mobile phones.
MIUI per capita consumption has been stagnant for many years, which may indicate that there may be some kind of problem in Xiaomi's new retail sector, otherwise the person in charge of new retail will not be replaced like a marquee.
Gao Ziguang, the first internally trained post-80s executive and vice president of the group, could not have left his post after just over a year of promotion. He was succeeded by Shang Jin, vice president of Xiaomi Group and head of the regional management department in China, who left his post in January this year. Shang Jin is a veteran of the Jinshan department, who led the development of the "Fengshen List", and from the public information, there is no offline business history.
The third person in charge of new retail is Wang Xiaoyan, the founder of the former Small Pepper mobile phone, who previously reported to Lu Weibing, which may mean that Lei Jun finally gave the opportunity to outsiders after two internal potential failures.
5% of the problems
At present, Xiaomi is also encountering a new problem, the domestic mobile phone market is shrinking,
The China Academy of Information and Communications Technology released an analysis report on the operation of the domestic mobile phone market in February this year, and the data showed that the shipment of mobile phones in the domestic market last month was 14.864 million units, down 31.7% year-on-year. What is even more desperate is that 5G mobile phone shipments fell by 24.5% year-on-year. It is worth mentioning that this is in the case of new product releases in OV, Samsung, and Redmi, and there has also been a sharp decline.
Xiaomi's situation in overseas markets is not much better than that in China.
For the whole of last year, Xiaomi International's revenue was 163.6 billion yuan, an increase of 33.7% year-on-year.
In the case of domestic competition and market growth, Xiaomi urgently needs to borrow power from overseas markets. Reflected in the data, we see that in the lack of new machine pull 2020Q1, Q3 and 2021Q3, Xiaomi's international revenue accounted for a large proportion.
However, the international environment is changing all the time, and any disturbance will affect Xiaomi's revenue in the area. For example, Xiaomi has dominated the top three ukrainian markets in recent years, and according to a survey by Russian e-commerce giant Yandex, Xiaomi is the most popular smartphone brand in Russia in the past four years. The Russian-Ukrainian conflict, regardless of the outcome, is bad news for Xiaomi.
Some marketing rollovers will also cause a lot of fluctuations. For example, last year, when Japan used "nuclear explosion" for marketing, it caused local dissatisfaction, and similar incidents more or less affected the international business revenue. Not to mention some areas with large exchange rate fluctuations, a person familiar with the matter earlier told Photon Planet that OVMi's loss in the Brazilian market mainly comes from the exchange rate.
The situation is indeed as Lei Jun said, high-end is Xiaomi's life and death battle, and high-end is also changing Xiaomi's revenue structure. On the one hand, the repurchase rate of rice noodles is getting lower and lower, and the role of new users is becoming more and more important. High-end also means that Xiaomi is more dependent on hardware and may not be able to realize the dream of hardware customer acquisition to drive software service revenue.
Regardless of whether the premiumization is successful or not, at least the smartphones with the lowest gross margins have reached 11.9% by 2021, just one step away from the 13.1% gross margin of the IoT business. The gross profit margin continues to rise, which means that Lei Jun's commitment to "hardware comprehensive net profit will never exceed 5%" is not far away, if it is not adjusted, it may really be necessary to give users gold.
Ten years of Hedong, ten years of Hexi, under the tide of global manufacturing transformation, the debate on whether Xiaomi is an Internet company is not so important, perhaps Lei Jun should be generous to admit that Xiaomi is "hard".
With so many users and cash in hand, as a hardware manufacturing brand, it is not chilling.