Author/Little Magic Pill
Editor/Cheng Yu
The mobile phone market is in constant conflict. If Huawei's current problem is in the chip, then Xiaomi is undoubtedly high-end, and founder Lei Jun even called the impact on the high-end "the life and death battle of Xiaomi's development".
For Xiaomi, which is accustomed to breaking the game with cost performance, "good at Internet marketing" and "good at model innovation" have changed from praise to shackles that need to be broken. If you want to move steadily and solidly to the high-end, Xiaomi still has a long way to go.
Fading labels
High-end has become a long-term dilemma for Xiaomi.
Combing the strategy, in 2019, Xiaomi proposed the development strategy of mobile phone dual brands, in which the Redmi brand focuses on the mass market and adheres to the basic disk; The Xiaomi brand sprints into the high-end market.
Since 2020, Lei Jun has repeatedly publicly talked about "millet is not understood". Lei Jun said that the outside world has three major misunderstandings about Xiaomi: no technology, low-end, OEM.
At the beginning of 2022, Xiaomi officially set up a high-end strategy working group, officially benchmarked Apple, and put forward the goal of "winning the first place in the domestic high-end mobile phone market share within three years". The urgency of the pursuit is overflowing with words.
Of course, on the one hand, it is ambitious but also forced by the situation. Since the beginning of 2021, Xiaomi's stock price has been sluggish, and Xiaomi's stock price has fallen by 43.07% throughout the year, close to the waist. Breaks have become the norm, and a hundred buybacks are still difficult to boost confidence.
In this high-end battle of life and death, how is Xiaomi performing?
According to the financial report, in 2021, in the case of global core shortage, Xiaomi's global mobile phone shipments and market share increased again, with annual shipments reaching 190 million units and a market share of 14.1%.
Specifically looking at high-end products, in 2021, the company's Chinese mainland high-end smartphones priced at RMB 3,000 yuan or more and overseas prices of 300 euros or more global shipments exceeded 24 million units, far exceeding the level of about 10 million units in 2020, achieving double growth.
Essence Securities believes that the proportion of Xiaomi's high-end smartphone shipments has increased, which has led to an increase in the gross profit margin of the smartphone business and an increase in the proportion of smartphone revenue, which has promoted the overall revenue growth of Xiaomi Group. At the same time, benefiting from the high-end strategy, the gross profit margin of Xiaomi's IoT business has also increased slightly.
The surface is bright, in fact, this high-end performance is not ideal. I have to admit that some of Xiaomi's high-end mobile phone shipments are achieved through price reductions, and some models have begun to continue to reduce prices within a few months of listing. For example, the folding screen mobile phone MIXFOLD started at 9999 yuan when it was listed in April last year, and the official price has now dropped to 6999 yuan. Such a depreciation rate is obviously not the proper style of high-end machines.
Driven by the high-end strategy, the average selling price of Xiaomi mobile phones has risen from 980 yuan in 2019 to 1097.5 yuan in 2021. Only an increase of 57 yuan, this part of the increase is much lower than the chip and material price increase. Moreover, this price range is still difficult to get rid of the embarrassing positioning of "thousand yuan machine", and it is difficult to say high-end.
From a high-end perspective, in 2021, Xiaomi's high-end smartphones (retail priced at 3,000 yuan or more than 300 euros) shipped more than 24 million units, accounting for 13%, and 7% in 2020; According to data from Counterpoint, a third-party research institute, the share of global high-end mobile phones (with an average wholesale price of more than $400 is about 2540 yuan) will reach 27% in 2021.
In other words, Xiaomi has not achieved a qualitative breakthrough at the level of high-end products.
In the view of 10,000 point research, after Huawei was sanctioned in the second half of 2020, Xiaomi's high-end ushered in a rare development opportunity, but Xiaomi did not seize the development opportunity. Although it has achieved a certain degree of increase in sales, it has not robbed too much of Huawei's share in the high-end field, and although the average price of mobile phones has increased, it is still dominated by thousands of yuan machines. If you want to break the high-end game, Xiaomi still needs to work hard.
What's the difference?
In depth, Xiaomi's high-end genes still have to speak of data, and gross profit margin and research and development expenses are two important considerations.
Gross profit margin has always been a hard injury to Xiaomi, which is not unrelated to its consistent cost-effective route since its inception. Lei Jun can be described as providing "poisonous milk": "From 2018, Xiaomi promised users that the comprehensive net profit margin of the overall hardware business, including mobile phones and various ecological chain products, will not exceed 5% every year, and if it is exceeded, we will return more than 5% to Xiaomi users in a reasonable way." ”
The comprehensive net profit margin of 5% is deeply rooted in the hearts of the people, and the hardware that does not make money is contrary to the high-end human design intended to be built.
Xiaomi's net profit margin in 2021 was 6.7% and gross profit margin was 17.7%, up from 5.3% and 14.9% in the previous year, respectively.
Its own vertical comparison has surpassed, but the horizontal comparison of the industry is still dwarfed: Apple's net profit margin in 2021 is 26%, and the gross profit margin is more than 42%, which is 2-4 times that of Xiaomi. In the fourth quarter of 2021, Apple's comprehensive gross profit margin reached 43.8%, an increase of 4 percentage points year-on-year, a new high in 10 years.
Look at R&D costs. What is eye-catching is that in 2021, Xiaomi's research and development 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%.
In the medium term, at the Xiaomi 12 conference at the end of 2021, Lei Jun said that in the previous two years, Xiaomi's R& D investment has exceeded 22 billion yuan, and at the same time announced the renewal of the R & D investment plan, the next 5 years of R & D investment from the original 50 billion yuan to 100 billion yuan.
Although it has achieved a breakthrough in its own dimension, the 4.01% R&D expense ratio is not high compared with the industry. Compared with Huawei, which is still in the state of "wintering", its R& D expense rate in 2021 is as high as 22.4%, and the specific cost is as high as 142.7 billion yuan, and the R& D expenditure of only one year exceeds Xiaomi's 5-year budget.
In the view of 10,000 points of research, the intensity of research and development depends on the cost of research and development to show perception. Through the visualization of digital figures, Xiaomi intends to convey a clear signal of attaching importance to technology research and development to the outside world, and then achieve high-end transmission. It is true that it plays a positive role in high-end upgrading, but with benchmarks such as Huawei in the same industry, Xiaomi's research and development aura is inevitably weak.
In the end, high-end slogans are not shouted out, but also rely on products to speak.
Most people seem to see that the "high-end" that Xiaomi understands may still be in its infancy. Among them, the "stacking" innovation of products is particularly criticized. This is reflected in the fact that although the hardware parameters are "high-end", the software experience is still at a relatively low-end level. It's hard to be refreshing. However, in addition to rice noodles, it seems that other users are still not interested in the "high-end" millet, and more urgently, the repurchase rate of millet has also fallen to 26.9% in Q3 2021, setting a record for the lowest in the past three years.
It can be said that product problems have always been the fundamental problem of Xiaomi's high-end.
High-end products mean leading technology and smooth experience. Huawei, where domestic brands really stand at the high end, has the hard power of its own mobile communication technology behind it, and at the same time invests high research and development costs in core hardware optimization, as well as self-developed high-end mobile SOC support. It took Huawei's mobile phone four years to stand at the high end.
Self-development strength is the confidence of high-end products. In addition to Apple's self-developed A-series processors, it also has a unique iOS complete ecosystem. Samsung also released its self-developed mobile phone flagship chip Exynos2200 not long ago, announcing that it officially benchmarked Qualcomm Snapdragon 8.
Industry insiders pointed out that many of Xiaomi's first technologies are supplier technologies, and it is difficult to say that they are original. Even the most basic quality control has problems. For example, Xiaomi 11 series mobile phones have been protected by a large number of consumers due to faults such as black screens, damaged motherboards, WiFi and hotspots that cannot be used.
In fact, this has to do with "unselectable" vendors. Xiaomi's high-end puzzle also plagues domestic mobile phone manufacturers. In core parts such as CPUs, Xiaomi OV does not have its own absolute right to speak. After all, at the level of Android high-end models, CPU chips can only choose Qualcomm, and due to process defects, Qualcomm in 2021 is "unstable", and heating problems generally appear on Android flagship machines.
Not only the hardware, but also the software level is difficult to say satisfactory. Once upon a time, MIUI was the pride of countless rice noodles, but after several years of iteration, MIUI was complained about because of bloatedness. The excessive pursuit of dynamics has led to an excessive burden on the MIUI12 system, and the compatibility and adaptation stability have plummeted. Because of the frequent system catons and bugs, MIUI has been heavily condemned in 2021. At the end of 2021, at the Xiaomi Mi 12 mobile phone conference, Lei Jun admitted that the past year was the year in which Xiaomi encountered the most criticism of rice noodles.
Channels have also been the hidden pain of Xiaomi's high-end.
Xiaomi can be described as a pioneer brand that pioneered the sale of mobile phones on the Internet, but the dependence of online channels is undoubtedly a constraint on high-end products, after all, consumers are more willing to pay for high-priced products only if they personally touch and see the actual products in offline channels. Changjiang Securities pointed out that offline channels are necessary for the high-end mobile phone market, and about 60% of high-end smartphones in China are sold through offline channels.
Lu Weibing, president of Xiaomi China, also said bluntly on Weibo: "In the Chinese market, which accounts for 70% of offline sales, Xiaomi's current shortcomings are still offline coverage problems. "In fact, the weakness of offline channel Millet is already an indisputable fact. According to investigative reports, among the four Rongmi OV companies, vivo, OPPO, Glory, and Xiaomi are arranged in order of profits, "OV profit margin can be about 300 yuan, and selling a xiaomi new machine in the season is only 50 yuan." ”
In summary, Wandian Research believes that whether in terms of market share, brand reputation or technology, Xiaomi has a big gap with the rulers of high-end markets such as Apple and Samsung. Xiaomi's cost performance and the breakthrough advantage of online channels have become its disadvantages in impacting the high-end to a certain extent. Just like the two sides of the coin, behind the obstruction of high-end strategy, what needs to be solved by Xiaomi is the development shortcomings in channels, research and development, product performance and other aspects under the framework of barrel theory.
Attack and hold on
Xiaomi is a company that is difficult to define. Lei Jun once said bluntly: "I don't care whether Xiaomi is an Internet company or not." Many people ask me whether I am giving Xiaomi Tencent a valuation or An Apple's valuation, and I say I want Tencent to take Apple's valuation because Xiaomi is all-round."
Indeed, in recent years, Xiaomi's development idea is to "use hardware for revenue and the Internet for profits" to do so. But contrary to expectations, hardware is still the main pillar of Millet's revenue, but the crotch of the growth rate of Internet service revenue makes the market quickly cast doubts. In 2021, the gross profit margin of Xiaomi's Internet service business hit a record high of 76.1%, but its revenue growth rate of 18.8% not only lagged behind the hardware business, but also nearly 6 percentage points lower than its own growth rate of 24.4% in 2019.
In addition, Xiaomi's high-end puzzle not only exists in the smartphone business, but also in the AIoT business that is increasingly regarded by Xiaomi as the hope of the future, and it also has to face the same problem. In the increasingly fierce competition, high-end positioning can provide more growth resilience.
In essence, the prosperity of the Internet ecosystem complements the development of hardware. In this way, the high-end strategy that can fundamentally improve the level of profits is naturally more important, and it is not unfounded to describe it as a "battle of life and death".
Under the pressure of internal and external pressure, Xiaomi's high-end sprint is non-stop.
From the perspective of the industrial chain, unlike Huawei's personal efforts, Xiaomi's layout in the chip field is still mainly investment- Xiaomi Yangtze River Industry Fund is known as the "Semiconductor CVC Big Three" in the industry. According to the public data of Tianyancha, more than 20% of the chip semiconductor investment of Xiaomi Yangtze River Industry Fund is invested in enterprises that design and produce semiconductor components, including Zhanxin Electronics in the field of silicon carbide semiconductors, Fastpass Semiconductor in the fabless semiconductor track, and Zhiduo, a programmable logic circuit device company.
Not only "buy, buy and buy", Xiaomi also personally made cores. Previously, Xiaomi 12Pro launched a self-developed "Xiaomi Surging P1" charging management chip, which filled the technical gap of the industry's 120W single cell and broke through the technical barrier that large batteries and fast charging above 100 watts could not be taken into account. The release of the surging P1 makes Xiaomi the first mobile phone manufacturer with a self-developed 100-watt fast charging chip.
Cross-border car building can also be seen as an extension of Xiaomi's high-end attack action. In March 2021, Lei Jun personally announced that Xiaomi had built a car. "Xiaomi Auto will be the last major entrepreneurial project in my life, and I am willing to bet on all the accumulated achievements and reputations in my life to fight for Xiaomi Auto!"
Different from mobile phones, smart cars are a new growth point that Xiaomi intends to create, and the technical strength required by the automotive category will also help to more clearly shape the high-end positioning of Xiaomi's heart and mind. Of course, behind the ambition is a high budget, Xiaomi said that the first investment of 10 billion yuan, the next 10 years to invest 10 billion US dollars.
In terms of investment, it has invested in more than 50 automotive industry chain enterprises, covering many core technology areas of the industrial chain such as intelligent driving, on-board chips, power batteries, and vehicles. It is reported that Xiaomi Automobile is expected to achieve mass production in the first half of 2024. Now, with two years left before the target time, there is no doubt that the pace will be accelerated.
In the view of Wandian Research, entering the car is not only Xiaomi's exploration of the Nth growth curve, but also a must-have skill to enhance the high-end positioning of its own brand. But at the same time, there are also risks, new energy vehicles are a high investment, long return period, strong iteration, big competition industry. As a latecomer, xiaomi grasps the match point is not easy. Whether it can achieve scale faster still tests the stability and malleability of Xiaomi's strategic ecology.
epilogue
IDC data shows that the shipment of Xiaomi mobile phones remains in the third position (14.1%), but the white-hot market environment and the high investment of Xiaomi in high-end and automobile routes will only increase the pressure on growth.
If you want to wear a crown, you will bear its weight. As the youngest Fortune 500 company in history, Xiaomi has been strong enough in business history, and the bottleneck breakthrough after rapid development has a sense of re-leaping through the dragon gate. "Born for fever" and "those who get dick silk to win the world" have become the past tense, hundreds of billions of research and development investment, "comprehensive benchmarking apple" is the focus of Xiaomi's current chase.
In fact, technology is established, experience is king, and high-efficiency models are the important anchor points for Xiaomi's high-end. Crisis coexists, and millet, which has been precipitated for twelve years, is still a question mark whether it can break through in the direction of high-end.