The competition in the mobile phone industry is fierce, and the moment it sets a goal, it means that Xiaomi is meeting a greater challenge
Text | Sasha Zhao
Edit | Wang Lifeng
According to IDC, global smartphone sales rebounded in 2021, up 5.7% year-on-year to 1.35 billion units. Xiaomi Group is determined to win the first place in global sales within three years and narrow the gap between it and international giants.
In 2021, Xiaomi's smartphone shipments reached 190 million units, an increase of 29.8% year-on-year, and although the global ranking remained unchanged from the previous year, it was still third, but the market share increased significantly to 14.1%.
However, the competition in the mobile phone industry is fierce, and the moment the goal is set, it means that Xiaomi is meeting a greater challenge.
Chart 1: Global manufacturer smartphone shipments and market share in 2021
Source: IDC
Let the data calm down the emotions
On March 22, Xiaomi Group (1810. HK) announced its 2021 results. By the end of 2021, Xiaomi achieved a total operating income of 328.3 billion yuan, an increase of 33.5% year-on-year; adjusted net profit of 22 billion yuan, an increase of about 69.5% year-on-year. From a quarterly point of view, in the fourth quarter of 2021, the company achieved operating income of 85.6 billion yuan, an increase of 10% month-on-month, an increase of 21.4% year-on-year; adjusted net profit of 4.47 billion yuan, down 13.5% month-on-month and 39.6% year-on-year.
According to IDC global quarterly mobile phone tracking data, in the third quarter of 2021, due to the shortage of upstream core components, Xiaomi's global shipments of smartphones fell from a high level to about 44.3 million units, down 4.6% year-on-year. In the same period, the sales of Honor mobile phones returned to the third place in the Chinese market, and in the global market, Apple returned to second with the hot sale of the iPhone 13.
Although the gross profit margin fluctuated between quarters, it was mainly due to the high-end mobile phone sales structure, and the company's gross profit margin for the whole year increased year-on-year. On an annual basis, in 2021, the gross profit margin level of Xiaomi Group reached 17.7% up 2.8 percentage points from 14.9% in 2020.
Chart 2: Quarterly change in Xiaomi Group gross margin (2019-2021)
Source: Company announcements Read a single reading
From a sub-regional point of view, in the past three years, the company's overseas income scale has continued to grow at an average annual rate of more than 30%, and global operation has become an important strategy and operating feature of Xiaomi Group. In 2021, the company's overseas market revenue reached 163.6 billion yuan, an increase of 33.7% year-on-year, accounting for 49.8% of revenue.
Chart 3: Xiaomi Group's overseas revenue (2019-2021)
Iron heart to go high-end
According to the ZDC Data Research Center of Zhongguancun Online, in 2021, consumers' attention to mobile phone models of 3000-4000 yuan, 4000-5000 and more than 5000 yuan has increased significantly. In particular, the price segment of 3000-4000 yuan accounted for 19.85%, an increase of 41.68% year-on-year.
The sales of high-end models are related to the brand image and product premium ability of mobile phone brands in the global market. In 2021, high-end has become a common choice for Chinese mobile phone brands. In August of the same year, Lei Jun said in his personal annual speech that Xiaomi mobile phones should win the first place in global sales and the first place in the domestic high-end mobile phone market within three years, that is, 2024.
Xiaomi's 2021 annual report disclosed that the company's overall sales of high-end mobile phones of more than 3,000 yuan were 24 million units, an increase of 1.4 times compared with 10 million units in 2020. In terms of shipments, Xiaomi's proportion of high-end smartphones increased from about 7% in 2020 to about 13% in 2021.
In 2021, Xiaomi's annual smartphone revenue reached 208.9 billion yuan, an increase of 37.2% year-on-year, and the proportion of revenue continued to increase to 63.5%. Due to the increase in the proportion of high-end models, the average unit price of Xiaomi mobile phones has been increased, and the gross profit margin of the smartphone business has increased from 8.7% at the end of 2020 to 11.9% at the end of 2021, and the gross profit contribution has reached 42.74%.
Chart 4: Xiaomi Group's gross profit contribution by business
（2019-2021）
In December 2021, Xiaomi launched the Xiaomi 12 series of high-end mobile phones in Chinese mainland, and according to third-party data, in January 2022, the first month after the launch of the Xiaomi 12 and Xiaomi 12 Pro, the combined shipments far exceeded the shipments of all other smartphone brands equipped with the new generation of Snapdragon 8 mobile platform processors combined. Among them, Xiaomi 12 Pro is equipped with Xiaomi's self-developed charging chip surging P1 and "everything chasing focus" algorithm, and after its release, it has become the sales champion of Android mobile phones with 4,000 yuan or more on JD.com and Tmall platforms in January 2022.
However, from a global perspective, the competition situation in the high-end market is still grim.
From Chart 5, it is not difficult to see that the international giant Apple has a solid high-end market position. While the average selling price of the Apple Pro model is well above $1,000, shipments have essentially exceeded 20 million units. Apple's total shipments of mobile phones in 2021 are 235 million units, of which 39% are models with an average selling price of more than $1,000.
Chart 5: Top 10 smartphone brands in the world with the highest sales in 2021
Everything also needs to be hard technology to lay the foundation
Whether it is a high-end mobile phone, or a smart life appliance, or even a future Xiaomi car, hard-core technology is a solid guarantee for the company's vitality. Xiaomi continues to increase its investment in research and development.
In 2021, Xiaomi's R&D expenditure reached 13.2 billion yuan, an increase of 42.3% year-on-year. The financial report expects that in the next five years, the Group's R&D investment will exceed 100 billion yuan, with an average annual investment of 20 billion yuan.
Chart 6: Xiaomi Group's quarterly R&D expenses (2019-2021)
In fact, since 2014, Xiaomi has begun to develop its own surging chips. In 2017 and 2021, the surging S1 and the surging C1 were released respectively.
At the same time, Xiaomi has also accelerated its investment layout in the chip field, which inevitably includes the purpose of strategic synergy. Since 2021, the number of chip companies such as Xiaomi Group, Xiaomi Yangtze River Industry Fund and Shunwei Capital has exceeded 20, involving AI chip research and development, display driver chips, RF and high-end analog chips, sensor chips, power device research and development.
However, due to insufficient technology accumulation, product quality problems often become the problem of "rice noodles".
Although the Xiaomi Mi 12 has been launched, the quality problems related to the Xiaomi Mi 11 are still endless in the market. According to media reports, "On the black cat complaint platform, there have been nearly 100 complaints about xiaomi 11 quality problems in one month, including but not limited to WiFi problems, black screens, camera failures, inexplicable catons, etc." ”
The author is a researcher at Caijing magazine