In 2021, Xiaomi's R&D expenditure reached 13.2 billion yuan, an increase of 42% year-on-year, and the proportion of revenue rose slightly from 3.76% in 2020 to 4.01%. Observer Network noted that although Xiaomi's research and development investment has increased, the research and development intensity is still not as good as Apple. According to the financial report, Apple's research and development investment in 2021 is 21.9 billion US dollars (about 140 billion yuan), and the proportion of revenue in the past three years has fluctuated at 6%-7%.
【Text/Observer Network Lv Dong Editor/Zhou Yuanfang】
On March 22, Xiaomi Group (hereinafter referred to as "Xiaomi") disclosed its 2021 annual results. During the period, the company achieved revenue of RMB328.3 billion, an increase of 33.5% year-on-year, while Adjusted Net Profit (Non-IFRS) for the same period was RMB22 billion, an increase of 69.5% year-on-year.
Before the disclosure of this financial report, 36 analysts of financial data company Refinitiv expected Xiaomi's revenue in 2021 to be 325.88 billion yuan, and the average expectation of Non-IFRS net profit was 21.67 billion yuan.
It can be seen that Xiaomi's performance is slightly higher than the market expectations, but there is not much surprise, and domestic analysts have said that this financial report is "decent".
However, in addition to the financial figures, the progress of many of Xiaomi's businesses is still worthy of market attention.
For example, in the "cash cow" smart phone business, Lei Jun has clearly proposed to "officially benchmark Apple", what new actions the company will have in the high-end mobile phone market this year, and whether there is a new plan for self-developed chips; in the newly proposed car-making plan, there is no specific information disclosure, and whether cash flow can maintain long-term research and development investment.
In terms of the capital market, before the release of the latest financial report, Xiaomi's stock price has been "broken" for nearly 2 months. After rising more than 10% in the past two trading days, Xiaomi's stock price closed down nearly 2% on March 24, and its current market value is HK$362.2 billion.
It is worth mentioning that on the day of the release of the financial report (March 22), Xiaomi announced that it would buy back shares in the open market from time to time at a maximum total of HK$10 billion. The company then announced on March 24 that it had granted about 174.9 million shares of Xiaomi shares to 4,931 employees, worth about 2.1 billion yuan.
The following is a detailed interpretation of Xiaomi's financial report.
Lei Jun at the Xiaomi Mi 12 press conference
Mobile phones are still the backbone of revenue, accounting for nearly half of overseas revenue
From the perspective of revenue structure, the smartphone business is still the revenue pillar of Xiaomi.
The financial report disclosed that Xiaomi achieved revenue of 208.87 billion yuan on smart phones in 2021, an increase of 37.2% year-on-year, accounting for 63.6% of total revenue, an increase of 1.7 percentage points over 2020.
Xiaomi 2021 financial report screenshot (the same below)
Looking at the global smartphone market in 2021, on the one hand, the shortage of chips has affected the shipments of some manufacturers, for example, Xiaomi has lowered its shipment expectations several times. But on the other hand, Huawei's share shrinking and LG's withdrawal from the market have also made a lot of room for other players.
Under the influence of comprehensive factors, Xiaomi's total smartphone shipments in 2021 still exceeded 190 million units, an increase of 30% year-on-year, and the global ranking only lagged behind Samsung and Apple to rank third, with a market share of 14.1%, a record high.
In the Chinese mainland market, Xiaomi mobile phones shipped 50.5 million units a year, lagging behind vivo and OPPO, also ranking third, with a market share of 15.2%, also hitting a record high.
In terms of overseas markets, according to Xiaomi, its smartphone shipment rate in the European market ranks second in 2021. During the same period, the company ranked first in smartphone shipments in 14 markets around the world and in the top five in 62 markets worldwide.
In this context, Xiaomi's total revenue in overseas markets in 2021 reached 163.59 billion yuan, accounting for 49.8%, unchanged from the same period last year.
Looking forward to this year's mobile phone market, Xiaomi executives revealed to the Observer network at the performance meeting that 200 million mobile phone shipments are within the company's plan for 2022. "Our global market share is only 14.1%, and there is still a lot of room for improvement from the first and second places. Therefore, in 2022, we will continue to pay attention to the layout of multiple markets to grasp more market space. ”
In addition to shipments, the unit price (ASP) is also a focus of Xiaomi's mobile phone business.
According to the financial report, in 2021, the ASP of Xiaomi smartphones was 1097.5 yuan, an increase of 5.6% year-on-year, of which the ASP in the fourth quarter was 1143.6 yuan. In the past three years, the ASP of Xiaomi mobile phones has continued to increase, previously 959.1 yuan (2018), 979.9 yuan (2019) and 1039.8 yuan (2020).
Image source: Longbridge Dolphin Research
However, the increase in the ASP of Xiaomi mobile phones is still weak, still fluctuating around thousands of yuan, which is also the reason why the outside world believes that Xiaomi's financial reports are more predictable, indicating that there is room for further optimization of Xiaomi's mobile phone product line portfolio.
Although the increase in the unit price of customers is not large, sprinting to the high end has always been Xiaomi's slogan.
The financial report disclosed that in 2021, xiaomi Chinese mainland high-end smartphones priced at RMB 3,000 yuan or more and overseas priced at 300 euros or more global shipments exceeded 24 million units, far exceeding the level of about 10 million units in 2020. In terms of shipments, the proportion of Xiaomi's high-end smartphones increased from about 7% in 2020 to about 13% in 2021.
"High-end" will become a high-frequency word for performance, and self-developed SoC is not considered for the time being
The substantial increase in high-end mobile phone shipments has directly stimulated the gross profit margin of Xiaomi's smartphone business. According to the financial report, the gross profit margin of the business increased from 8.7% in 2020 to 11.9% in 2021.
Wang Xiang, president of Xiaomi Group, concluded at the performance meeting that these achievements were mainly due to the company's increasing investment in research and development. In 2021, Xiaomi's R&D expenditure reached 13.2 billion yuan, an increase of 42% year-on-year, and the proportion of revenue rose slightly from 3.76% in 2020 to 4.01%.
Observer Network noted that although Xiaomi's research and development investment has increased, the research and development intensity is still not as good as Apple. According to the financial report, Apple's research and development investment in 2021 is 21.9 billion US dollars (about 140 billion yuan), and the proportion of revenue in the past three years has fluctuated at 6%-7%.
In the fourth quarter of 2021, with the position of iPhones and Macs in the high-end market, the gross profit margin of Apple's hardware business reached 38.4%, a new high in 6 years.
Moving towards the high-end mobile phone market is the goal that Lei Jun has put forward in 2020.
At that time, the domestic high-end mobile phone market was under the duopoly of Huawei and Apple.
IDC report shows that in the first half of 2020, the total sales of domestic high-end mobile phones (more than 4,000 yuan) were 23.5 million units, Huawei ranked first with a share of 44.1%, and Apple ranked second with a slight gap of 44.0%. Although Xiaomi is closely behind in third place, it needs to compete with OPPO, Samsung and other manufacturers for the remaining 10% share.
After Huawei was hit by the United States, the domestic Android camp ushered in important opportunities. But unfortunately, after the iPhone adopted a low-price strategy, Xiaomi OV did not show too strong resistance.
According to the data released by market research agency CINNO Research, in the fourth quarter of 2021, Apple dominated the high-end market of more than 5,000 yuan driven by the strong performance of its new iPhone 13 series, and its share increased significantly from 48% in 2020 to 75%, seizing Huawei's original high-end market share.
Apple CEO Tim Cook
Is the question just apple price cuts?
Tian Ting, senior analyst at CINNO Research, pointed out to the observer network that comparing Xiaomi's latest flagship Xiaomi 12 series and iPhone13 series, it is already excellent enough in hardware configurations such as screen, charging, photography, battery, etc., but there is still a big gap between the core technologies such as chips and operating systems and Apple, on the one hand, Apple has a self-developed A series chip and a unique iOS system that is ahead of other brands, which greatly enhances the sense of user experience. On the other hand, Apple, as the industry leader, has an innate advantage in the control of the supply chain, and xiaomi's "system with Google, chip with Qualcomm" model that is indistinguishable from other Android brands always has the risk of being "stuck neck".
But Xiaomi is not willing to look down on itself. At the Xiaomi 12 conference at the end of December 2021, Lei Jun proposed two "small goals", one is to achieve the world's first sales volume of Xiaomi brand mobile phones within three years, and the other is to "officially benchmark Apple and learn from Apple". He also said bluntly at the time, "Domestic mobile phones should have such courage, why not compare it?" In comparison, you may find that the strength of domestic mobile phones is much stronger than everyone thinks. ”
At this performance meeting, Wang Xiang also repeatedly mentioned the high-end strategy of Xiaomi mobile phones to the media such as observer network.
He said frankly, "Xiaomi's high-end or dual-brand strategy will continue to promote follow-up, we must do a good job of high-end products, in the Chinese market and global market, on the basis of stabilizing the company's traditional inherent customer base to do a good job in the high-end market." We have made great progress in 2021 and we will continue to promote the high-end market in 2022. ”
In terms of research and development, Wang Xiang revealed that Xiaomi's R& D investment in 2021 has exceeded expectations, and there will be "good growth" in this regard in 2020. In the next five years, Xiaomi's R & D investment will reach an average of 20 billion yuan per year, "the absolute value will be greater".
As market analysts said, self-developed chips and operating systems are Apple's moat in the high-end market, domestic mobile phones want to sprint high-end seems to be unable to avoid this road, the current Xiaomi OV has its own self-developed chip plan, but are not the most difficult mobile phone SoC. The self-developed SoC chip can undoubtedly make the domestic Android camp more proactive when bargaining with Qualcomm and MediaTek.
When asked about Xiaomi's chip strategy, Wang Xiang said at the performance meeting that the company is currently focusing on areas directly related to user experience, such as fast charging and imaging, starting from this aspect to do some products to accumulate experience, exercise the team, attract better talents to this team, and then make other investments.
This statement also means that Xiaomi may not have a plan to develop its own SoC for the time being.
In terms of channels, Wang Xiang revealed that Xiaomi's share of the domestic online market in 2021 will be 33.6%, an increase of 10 percentage points year-on-year; in the domestic offline market, the number of xiaomi stores at the end of 2021 will exceed 10,000, and more than 7,000 new stores will be opened throughout the year. "Our domestic offline market share increased from 5.2% in 2020 to 6.7% in 2021. In 2021, we will focus on store expansion, and in 2022, we will further improve our store efficiency on this basis. ”
The car team exceeded 1,000 people, "progress exceeded expectations"
Outside of smartphones, IoT and consumer goods are Xiaomi's second largest source of revenue.
In 2021, Xiaomi's IoT and consumer goods business revenue was 85 billion yuan, an increase of 26.1% year-on-year, mainly due to increased sales of smart TVs, Xiaomi Tablet 5 series (launched in August 2021) and smart air conditioners. Among them, the revenue of Xiaomi smart TVs and laptop computers increased from 22.5 billion yuan in the previous year to 27.4 billion yuan in 2021, mainly due to the rise in smart TV ASP.
The financial report also disclosed that in 2021, the revenue of Xiaomi's IoT and consumer goods business accounted for 25.9%, down 1.5 percentage points year-on-year. The gross margin of the business was 13.1%, a slight increase of only 0.3 percentage points. During the Period, the cost of sales of the business increased from $58.8 billion in 2020 to $73.9 billion in 2021 due to higher sales of IoT and consumer products and higher prices of certain core components.
Xiaomi's third largest source of revenue is Internet services.
According to the financial report, in the whole year of 2021, Xiaomi's Internet service revenue reached 28.2 billion yuan, an increase of 18.8% year-on-year, and the overseas revenue of the business was 5 billion yuan in the same period, accounting for 17.8% of the overall Internet service revenue. During the period, the gross profit margin of Xiaomi's Internet service business was 74.1%, an increase of 12.5 percentage points over the same period last year, mainly due to the increase in the contribution of advertising business.
There are interpretations in the market that the vast majority of Xiaomi's profits come from the Internet business, because the comprehensive net profit margin of hardware cannot exceed 5%, and the actual hardware profit margin disclosed in the financial report in 2021 is only 2%. Therefore, compared with Meituan or Pinduoduo, stable and controllable Internet profit growth is more important for Xiaomi's performance.
According to Xiaomi, as of December 2021, the company's global MIUI monthly active users reached 509 million, an increase of 28.4% year-on-year, and the number of net new MIUI monthly active users for the whole year was 113 million; during the year, the number of monthly active users of Chinese mainland MIUI was 130 million, an increase of 17.0% year-on-year, but the proportion was only 25.5%, and the number of net new users was 18.9 million. It can be seen that more than 70% of Xiaomi's MIUI active users are located overseas.
In 2021, in Xiaomi's Internet service business, advertising business revenue reached 18.1 billion yuan, an increase of 42.3% year-on-year, mainly due to the continuous expansion of user scale, the increase in the proportion of high-end mobile phones and the enhancement of commercialization capabilities; game revenue was 4 billion yuan, a year-on-year decrease of 5.7%, mainly due to the first half of the year is still affected by the adjustment of commercial terms in the third quarter of 2020, and the business recovered in the second half of the year.
In addition, Xiaomi's other revenue in 2021 was 6.2 billion yuan, an increase of 149% year-on-year, and the financial report said that this income was mainly due to the sale of apartment buildings and materials.
After the introduction of the main business, the progress of Xiaomi's car manufacturing has also attracted much attention from the outside world.
In November 2021, Xiaomi Auto announced its settlement in Beijing Economic Development Zone (Yizhuang). The project will build Xiaomi Automobile's headquarters base, sales headquarters, R&D headquarters, and will build a vehicle plant with an annual output of 300,000 vehicles in two phases, of which the first and second phases of production capacity are 150,000 units respectively.
Xiaomi said in its latest financial report that since Xiaomi announced the construction of cars in March 2021, the smart electric vehicle business has progressed more than expected. Up to now, the size of Xiaomi's automotive business R&D team has exceeded 1,000 people, and in the future, the company will continue to expand research and development in core areas such as automatic driving and intelligent cockpit, and is expected to be officially mass-produced in the first half of 2024.
Wang Xiang also told the observer network and other media at the performance meeting, "First of all, our car has established a very efficient and strong team in a relatively short period of time, which has exceeded 1,000 people, many of whom are R & D personnel, and we have begun to do these work of car research and development intensively and with all our might." And our goal is still to set the car in the first half of 2024. I think that as of today, there are only two points that we can report to you at this point in time. ”
For Xiaomi's auto business, Lei Jun said last year that the company's initial investment in the car-making business was 10 billion yuan, and it is expected to invest 10 billion US dollars in the next 10 years. This also means that before Xiaomi Cars officially mass production, the business needs strong cash flow support. According to Wang Xiang, Xiaomi's cash reserves are still quite abundant. By the end of 2021, the company's cash reserves reached 106 billion yuan.