Cover source | Visual China
On March 22, Xiaomi released its 2021 annual results, adding a bright color to the dull mobile phone market.
For the whole year, Xiaomi achieved a cumulative operating income of 328.309 billion yuan, an increase of 33.5% year-on-year; the adjusted net profit reached 22 billion yuan, an increase of 69.5% year-on-year.
In the fourth quarter alone, Xiaomi achieved operating income of 85.575 billion yuan, an increase of 21.4% year-on-year; adjusted net profit was 4.473 billion yuan, an increase of 39.6% year-on-year.
In 2021, under the influence of commodity price increases and the "lack of core tide", the capital market is worried about the development of the mobile phone industry, and Xiaomi's excellent profit growth rate has undoubtedly given the market a shot in the arm.
In fact, since 2017, after the mainland mobile phone shipments began to slow down, xiaomi's growth has been constantly questioned by the outside world, and xiaomi has repeatedly surprised the capital market with an average annual compound growth rate of 30%.
So, in the "not very friendly" industry environment, what exactly does Xiaomi rely on to achieve contrarian growth?
Strong research and development has promoted the penetration rate of high-end models to continue to increase
In 2021, the operating income of Xiaomi's three major business sectors of smart phones, IoT and Internet services will break through record highs, and the most eye-catching of them is undoubtedly the core smartphone business.
Xiaomi's various business segments Revenue / Source: Company Financial Report, 36Kr Finishing
From the perspective of financial performance, Xiaomi's smartphone business achieved revenue of 208.9 billion yuan in the whole year, an increase of 37.2% year-on-year. From the sales data, in 2021, Xiaomi mobile phone shipments reached 190 million units, an increase of 30% year-on-year, ranking third in the world, with a market share of 14.1%; in terms of average price, the ASP of Xiaomi mobile phones increased by 5.6% from 1039.8 yuan in 2020 to 1097.5 yuan in 2021.
The growth of Xiaomi mobile PHONE ASP is mainly due to its continuous promotion and landing of its high-end strategy.
In the case of the global mobile phone market is close to saturation, increasing the value of stand-alone machines and realizing the high-end of mobile phone brands have become a necessary means for the sustainable development of each domestic mobile phone brand, and Xiaomi's high-end road is obviously at the forefront.
In 2021, Xiaomi's high-end smartphones priced at 3,000 yuan or more than 300 euros will ship more than 24 million units worldwide, far exceeding the level of about 10 million units in 2020. If calculated by shipments, Xiaomi's share of high-end smartphones has increased from about 7% in 2020 to about 13% in 2021. The continuous improvement of the penetration rate of high-end models has also directly increased the gross profit margin of Xiaomi's mobile phone business by three percentage points from 8.7% in 2020 to 11.9%, achieving positive growth for three consecutive years.
Xiaomi mobile phone business gross margin information / source: Wind, 36Kr finishing
The reason why Xiaomi's high-end strategy of mobile phones can be successful is inseparable from its strong R & D investment and the cultivation and emphasis on talents.
In 2021, Xiaomi's R&D investment reached 13.2 billion yuan, an increase of 42.3% year-on-year, and the compound growth rate from 2017 to 2021 was as high as 43.0%. At the xiaomi 12 conference last year, founder Lei Jun announced that in the next five years, the company's research and development investment will increase to more than 100 billion, which is double the original plan.
In terms of talent training, Xiaomi has successively launched the Young Engineer Incentive Plan and the Middle and Senior Managers and New Decade Entrepreneurs Plan in 2021, accumulatively issuing more than 190 million shares of equity incentives to the company's outstanding talents, laying a solid foundation for Xiaomi's new decade strategy.
Xiaomi R&D investment and R&D expense ratio / Source: Wind, 36Kr collation
Xiaomi's strong R & D investment has achieved rich results in product strength.
In 2021, Xiaomi launched the first self-developed professional imaging chip Surging C1 and the first self-developed charging chip Surging P1 on the two high-end flagship models of MIX FOLD and Xiaomi Mi 12 Pro. At the same time, Xiaomi also launched a liquid lens on the MIX FOLD, and launched the "Everything Focus" algorithm on the Xiaomi Mi 12 and 12 Pro to continuously optimize the image experience.
Under the support of huge product force, in January 2022, the cumulative shipments of Xiaomi 12 series products in the first month after launch far exceeded the shipments of all other smartphone brands equipped with the new Snapdragon 8 series processor combined.
What is more noteworthy is that more than 50% of the first month purchase users of Xiaomi 12 series mobile phones are new users who have not used Xiaomi mobile phones. This not only shows that the company's R & D investment has been recognized by consumers, but also means that Xiaomi still has a huge potential user base, which is also an important foundation for Xiaomi to maintain high growth in the future.
In addition, in the field of non-mobile phone hardware, Xiaomi also released the first smart glasses with information display, navigation, photography and other functions - Xiaomi Smart Glasses Exploration Edition, and set up a robot laboratory, launched the first CyberDog bionic quadruped robot, further enhancing the company's hard technology strength.
In terms of software, in the fourth quarter of 2021, Xiaomi launched MIUI 13, which greatly improved the fluency of both system applications and third-party applications by optimizing memory management and background operation efficiency, improving data calculation and access speed. In addition, the new privacy protection function in MIUI 13 further builds a guarantee for user information security and privacy protection.
Finally reflected in the financial report, Xiaomi's continuous investment in research and development has brought about a continuous improvement in the gross profit margin of the whole business line. The company's consolidated gross profit margin also increased from 12.69% in 2018 to 17.75% in 2021.
Xiaomi's gross profit margin of each business line / Source: Wind, 36Kr collation
The business structure is continuously optimized to enhance the resilience of performance
In addition to the above-mentioned mobile phone business, Xiaomi also has a good performance in the IoT and Internet business.
In 2021, Xiaomi's IoT and consumer products business continued to grow steadily, with revenue reaching RMB85 billion, an increase of 26.1% year-on-year. The operating income of the Internet service business reached 28.2 billion yuan, an increase of 18.8% year-on-year.
In the IoT series of product matrix, Xiaomi's smart TV shipments reached 12.3 million units, ranking first in China for three consecutive years; the operating income of smart home appliances increased by 60% year-on-year, of which air conditioning shipments reached 2 million units, an increase of more than 70%; and in the wearable device field, in the fourth quarter of 2021, Xiaomi's wearable wristband devices and TWS secondary shipments ranked second in the world.
In the Internet service business, in addition to the steady growth of revenue, there are still two major bright spots. First, the gross profit margin increased significantly from about 65% to 74.04%, and the second is that the overseas business increased by nearly 80% year-on-year in the fourth quarter, and the global MIUI active users reached 509 million.
Although the Internet service business accounts for less than 10% of the company's total revenue from the perspective of operating income, from the perspective of gross profit, the gross profit of the business accounts for as much as 35%, which is an important source of the company's profit. (Gross Profit = Operating Income * Gross Margin)
In total, the total gross profit of Xiaomi's IoT business and Internet business has exceeded 50%, which has become an important business that the company cannot ignore, and the steady growth of these two major businesses has also greatly improved the company's ability to resist risks.
The gross profit of Xiaomi's various businesses / Source: Wind, 36Kr finishing
The globalization strategy + sinking market has promoted steady growth in performance
In terms of overseas markets, Xiaomi's years of deep cultivation and operation have also brought rich returns, and the diversified layout of the global market has also added resilience to the company's growth.
In 2021, the company's overseas market revenue reached RMB163.6 billion, an increase of 33.7% year-on-year, accounting for 49.8% of the total revenue. According to Canalys data, in the whole of 2021, Xiaomi ranked first in smartphone shipments in 14 countries and regions around the world, and ranked in the top five in 62 countries and regions in the world.
In particular, it should be noted that in terms of overseas sales channels, Xiaomi has begun to exert its strength on the most important operator channels.
Contrary to the domestic market, the sales channels of overseas smart phones are still dominated by operator channels, and the deeper the binding between mobile phone manufacturers and operator channels, the stronger the vitality.
In 2021, Xiaomi shipped more than 25 million smartphones through carrier channels in overseas markets, an increase of more than 120% year-on-year. Among them, the company's operator channel market share in Europe increased from 7.9% in 2020 to 16.8%, and the channel market share of operators in Latin America increased from 4.6% in 2020 to 12.3% in 2021.
While making major breakthroughs in overseas sales channels, Xiaomi has also begun to exert efforts in offline channels in the domestic market.
From the overall situation of the domestic mobile phone market, although consumers in first- and second-tier cities prefer online purchases, offline sales are actually the mainstream, accounting for 70% of the share. Although Xiaomi's online channels have an overwhelming advantage, the company's strategy of developing high-end mobile phones needs the help of offline channels. At the same time, after the offline channels are deployed to third- and fourth-tier cities, they can also explore the growth potential of the sinking market.
From 2021, Xiaomi will accelerate the layout of offline channels. As of 2021, the number of stores in China has exceeded 10,200, the coverage rate of cities and towns has exceeded 97% and 85%, and the sales expenses have increased by 44.3% year-on-year to 20.98 billion yuan.
In January 2022, the sales of Xiaomi 12 series mobile phones in the offline channels of the mainland market have accounted for more than 50%, and the offline layout has achieved initial results.
Overall, Xiaomi's multi-regional layout in overseas markets and the development of domestic offline channels will become a stabilizer and booster for the company's performance growth.
Actively practice social responsibility and feed back the brand image
The establishment of corporate brand image is not only the result of marketing, but also the recognition of the public after practicing social responsibility.
In December 2021, Xiaomi won the "ESG Excellence Award" issued by the Hong Kong Chamber of Listed Companies (CHKLC), and in October of the same year, the company was also listed as the "2021 Forbes Global Best Employer". In terms of user security, Xiaomi's IoT ecosystem has also been recognized by IoTSF.
In terms of specific responsibility practice, the company has further promoted the development of social welfare undertakings. Among them, the Beijing Xiaomi Public Welfare Foundation will actively carry out emergency relief activities in Henan, Shanxi and other places in 2021, and actively participate in the anti-epidemic activities in Xi'an. At the same time, the foundation launched the "Xiaomi Scholarship and Bursary" project in 2020, and plans to distribute 500 million yuan of scholarships and grants to more than 100 colleges and universities within five years.
In terms of investment, Xiaomi also actively transfers funds to the field of intelligent manufacturing to promote the industrialization and upgrading of the mainland manufacturing industry.
At the two sessions of the National People's Congress in 2022, Xiaomi founder Lei Jun made suggestions and suggestions to the state in the two directions of promoting green low-carbon and public welfare innovation, and the company also actively took action to start expanding the smart electric vehicle business.
Overall, Xiaomi has made good progress in the high-end of the model, the global diversification layout, and the construction of offline channels, which also makes Xiaomi hand over a good report card in 2021. Under the support of strong R & D investment, the continuous strengthening of Xiaomi's product strength has also added a guarantee for the company's future growth.