Produced by Radar Finance and | Li Yihui, ed. | Deep Sea
In the Indian market that Xiaomi has been cultivating for many years, there is constantly bad news coming.
On May 8, according to Reuters, Xiaomi said its top management faced the threat of "personal violence" when questioned by India's financial crime fighting agency.
According to previous reports, earlier this month, Indian law enforcement authorities claimed that Xiaomi's subsidiary violated the Foreign Exchange Control Law by illegally sending money to overseas institutions and seizing US$725 million (about 4.8 billion yuan) of assets belonging to Xiaomi Technology India Pte Ltd (hereinafter referred to as "Xiaomi India").
But on May 6, after hearing the opinions of Xiaomi's lawyers, indian courts lifted the freezing of Xiaomi's assets by federal agencies. The case is said to be heard next time on May 12.
In this regard, the official statement of Xiaomi India said that the company strictly abides by Indian laws, the fees paid are used for the licensed technology and intellectual property rights in the Xiaomi India version of the product, these royalties and bills are all legal and true, and the company will be committed to working closely with government departments to clarify any misunderstandings.
According to the data, as early as March 2014, Xiaomi began to enter the Indian market. At the press conference a year later, Lei Jun said the phrase "Are you OK?" with a Hubei accent. In March 2017, Lei Jun also visited Indian Prime Minister Modi and delivered Xiaomi mobile phones made in India.
Under years of cultivation, India has become an important overseas market for Xiaomi. According to the latest data released by Counterpoint, the Revenue of the Indian smartphone market will exceed $38 billion in 2021, an increase of 27% year-on-year. Among them, Xiaomi has a market share of 24%, and its shipments continue to lead the market.
However, Xiaomi's leading position in the Indian market is not stable. According to research firm Canalys, Xiaomi (including POCO) shipped 8 million units in the Indian market in the first quarter, down 24% year-on-year, and lost 7 percentage points to 21% of its market share, narrowing its lead.
In the secondary market, Xiaomi's market value continued to shrink, following last year's decline of 43.07%, it has fallen by 41.27% this year, and the latest market value is around HK$270 billion.
According to data released by market research institute IDC, in the first quarter of this year, domestic smartphone shipments fell by 14.1% year-on-year, and Xiaomi's shipments also fell by 18.4%. For Xiaomi, it is becoming increasingly difficult to maintain high growth in the mobile phone market. Although the car is an imaginative new business, it is still in the stage of burning money, and whether Xiaomi can come up with a product that conquers investors remains to be tested by time.
The Indian market is constantly in turmoil
According to media reports, the indian side seized assets on the grounds that Xiaomi and its subsidiaries were suspected of violating India's local Foreign Exchange Control Law and suspected of illegally remitting money to foreign entities by pretending to pay royalties.
On April 29, according to an official Indian document, the Central Enforcement Agency, India's financial crimes agency, said it had seized assets of 55.5127 million rupees (about 4.79 billion yuan, $725 million) in the bank accounts of Xiaomi India.
According to the document, Xiaomi India is a wholly-owned subsidiary of the China-based Xiaomi Group, a mobile phone trader and distributor of the Xiaomi brand in India.
"Xiaomi India started operating in India in 2014 and has been sending money since 2015. The company has remitted the equivalent of Rs 5,551,270 crore in foreign currencies to three foreign entities, including a Xiaomi Group entity under the guise of royalties. India's Enforcement Agency said such a huge royalty was remitted at the direction of its Chinese parent group entity.
The documents show that Xiaomi India did not receive any services from the three foreign entities, but under the cover of various unrelated documents created between the group entities, the company remitted the money abroad in the name of royalties, in violation of Article 4 of the Foreign Exchange Control Act.
The company also provided misleading information to banks when it sent funds abroad, the documents said.
After the incident, Xiaomi India responded urgently, and all operations of Xiaomi India Company strictly complied with local laws and regulations. The company carefully studied the authorities' orders and believed that the royalties and bills paid by the company to the banks were legal and true.
"These royalties paid by Xiaomi India are used for licensed technology and intellectual property used in our Indian version of our products. For Xiaomi India, paying such royalties is a legitimate business practice. Xiaomi India said it would work closely with the government to clarify any misunderstandings.
Meanwhile, Xiaomi filed a lawsuit with the High Court of Karnataka in southern India against India's decision to fight financial crime.
According to Caixin, on May 5, the Indian court issued an order to suspend the freezing of Xiaomi's assets for one week until May 12.
The court's interim order stated that during the suspension period, Xiaomi could use an Indian bank account to pay day-to-day operating expenses, but could not pay patent fees or other fees to companies outside India, and if Xiaomi wanted to pay companies outside India, it would have to be decided after the trial on May 12.
According to the latest reuters report, xiaomi india's former general manager and chief financial officer were subjected to "physical violence and threats of coercion" when questioned by Indian law enforcement agencies.
According to the report, Xiaomi's documents filed with the court on May 4 said that when its executives appeared in court several times in April for questioning, officials from The Indian Law Enforcement Agency warned them and their families that they would face "terrible consequences" if they did not submit a statement as requested by the agency.
Among them, Chief Financial Officer Rao, under "extreme coercion", added "I admit that Xiaomi Technology India Pte Ltd has paid royalties in accordance with the instructions of certain people in the Xiaomi Group". However, the day after Rao submitted the statement, he withdrew it and stated that "[I] made [this statement] not on a voluntary basis but under duress".
However, the Indian Enforcement Agency denied the claim, saying Xiaomi's allegations were "untrue and baseless" and that Xiaomi executives testified voluntarily "in the most favorable circumstances."
In fact, the investigation of Xiaomi India by the relevant Indian agencies has been for some time.
As early as December 21 last year, Chinese mobile phone manufacturers including Xiaomi and OPPO were raided by the Tax Bureau of the Indian Finance Bureau for tax inspection. According to people familiar with the matter, Xiaomi's factories, warehouses, offices, executive residences, and some distributors were within the scope of the raid.
On January 5 this year, India's Ministry of Finance said in a statement that after the investigation found tax evasion, it had issued a notice to Xiaomi India to pursue 653 million rupees (about $88 million) in taxes to the company.
The reason is that Xiaomi India did not include the amount of royalties paid by Xiaomi India to Qualcomm and Xiaomi software in the declaration of import value, which depressed the value of the goods and violated India's Customs Law.
But Xiaomi believes that whether royalties, including patent royalties, should be included in the price of imported goods is a complex technical dilemma in various countries.
At present, the disagreement over the payment of royalties has not been completely resolved, and has become the main reason for India's continuous attacks.
First-quarter Indian shipments down 24%
Xiaomi's difficult situation in India is also reflected in its declining market share.
According to reports, in March 2014, Xiaomi launched its first smartphone, the Xiaomi Mi 3, in India, which was only sold through online channels at that time.
Under the control of Hugo Barra, a former spokesman for Google's Android products, and Manu Kumar Jain, the head of local business, Xiaomi chose to cooperate with the well-known e-commerce company Flipkart when entering the Indian market, copying the mature "hunger marketing" and cost-effective strategy in India.
This model proved to be very effective, and only 2 years after entering the market, Xiaomi's India business revenue exceeded $1 billion in 2016 and achieved profitability.
But what really made Xiaomi take off in the Indian market was thanks to a new policy of local operators. In September 2016, Indian telecom operator Jio announced that it would offer 4G services to Indian users for free. In less than half a year, Jio's move has won it more than 100 million 4G users.
Such a strategy has accompanied the popularization of 4G networks, and it has also benefited from smartphone synchronization.
In 2016, Xiaomi launched the Redmi Note 3 in India, equipped with a Qualcomm processor, coupled with a starting price of 9999 rupees (about 956 yuan), which made the model squeeze into the top three of the best-selling models in the Indian market that year. The subsequent Redmi Note 4 became the fastest smartphone in India to sell 1 million units.
In addition, Xiaomi has also quickly started localization production. Including the completion and commissioning of the production line established in cooperation with Foxconn in the second year of entering India, and the second manufacturing plant in 2017.
However, a single online channel and a limited-time rush strategy have challenged Xiaomi. Some disgruntled tech writers argue that it's inappropriate to recommend a phone that's not easy to buy to readers.
Therefore, in 2017, Xiaomi India added direct stores, and also began to cooperate with other mobile phone stores to strive to open offline channels. Driven by these initiatives, Xiaomi's rise in India is staggering.
By the third quarter of 2017, according to the Times of India, Xiaomi's mobile phone market share equaled Samsung's reach of 23.5%, tied for the largest smartphone brand in the Indian market.
According to data from IDC, Counterpoint, Canalys and other market research agencies, from 2018 to 2021, Xiaomi's smartphone market share in India was 28.9%, 28.6%, 26% and 24%, showing a downward trend.
By the first quarter of 2022, Xiaomi's market share in India had fallen to 21%. According to Indian smartphone shipments released by market statistics agency Canalys, Xiaomi ranked first with shipments of 8 million units in the first quarter of 2022, with a market share of 21% in India; Samsung ranked second with 6.9 million shipments, with a market share of 18%.
In contrast, in the first quarter of 2021, Xiaomi's market share was still 28%, and it fell by 7% a year later. At the same time, the latest quarter shipments of 10.5 million units fell to 8 million units, down 24% year-on-year, the most serious decline among the top 5 brands.
In contrast, the fastest-growing "Others" once grew by 103% this year. This growth rate shows that unlike the inherent situation of Xiaomi, Samsung and OV sweeping the market in the past, the smartphones of Indian local brands still remain highly competitive.
Canalys analysts believe that the supply chain has been affected by the epidemic, xiaomi and vivo, and the head brands such as realme and Tecno (decano), which rely more on India's local supply chain, have performed well and can compete with the top brands in the Indian market in the first quarter.
Today's epidemic disturbance still exists, in the Indian market with the low-end as the main force, how xiaomi under the internal and external difficulties can block the offensive from local brands and maintain the existing market share is not an easy task.
Xiaomi's market value is less than HK$300 billion
Previously, on March 22, Xiaomi Group announced its 2021 annual results, showing that the total revenue of the whole year last year reached 328.3 billion yuan, an increase of 33.5% year-on-year. Adjusted net profit reached 22 billion yuan, an increase of 69.5% year-on-year.
Behind the rapid growth, it is inseparable from the contribution of mobile phones, overseas markets and Internet service business.
For example, in 2021, the single revenue of Xiaomi's mobile phone business reached 208.869 billion yuan, an increase of 37.2% year-on-year, accounting for 63.6% of the total revenue; the overseas market revenue was 163.6 billion yuan, an increase of 33.7% year-on-year, accounting for 49.8% of the total revenue; and the Internet service revenue reached 28.2 billion yuan, an increase of 18.8% year-on-year.
It is worth noting that in 2021, Xiaomi's Internet service business contributed 35.9% of the gross profit with 8.6% of revenue, which includes advertising revenue, game revenue and financial revenue.
The car-making business that has attracted much attention, the current research and development team of the intelligent electric vehicle business disclosed in the financial report has exceeded 1,000 people, and the time point of mass production is still in the first half of 2024. Luo Baojun, general manager of Xiaomi's Beijing-Tianjin branch, also revealed that Xiaomi's first engineering prototype will be released in the third quarter of this year and "will break everyone's imagination".
At the same time, Xiaomi Group once again threw out a 10 billion Hong Kong dollar repurchase plan, after the company issued a share repurchase plan several times. But the news did not stop the decline in Xiaomi's stock price, which hit its lowest price in nearly two years on April 27. After two years of sharp corrections, Xiaomi's latest market value is HK$277.3 billion, only 31% at its peak.
Even so, there are still institutions that have recently "sung down" Millet.
On April 11, UBS issued a research report saying that Xiaomi's 2022-2023 earnings per share forecast was lowered by 9% and 7% to 0.78 yuan and 0.88 yuan, respectively, and the target price was lowered from 23 yuan to 15 yuan, a reduction of 34.78%.
The bank estimates that Xiaomi's smartphone shipments in 2022 and 2023 will be lower than Xiaomi's revised shipments target for this year. It is expected that high-end will increase the average selling price, but the increase in 5G material costs and logistics expenses will erode profits, and the bank also lowered the revenue forecast of Xiaomi's IoT home appliances and Internet services.
The bank also believes that Xiaomi needs to provide greater transparency for its smart electric vehicle business.
On April 14, Macquarie Research Also lowered its mobile phone sales forecast due to the poor performance of the mobile phone market due to weak consumption and cost inflation. In view of the decline in smartphone revenue and profit margins, the bank lowered xiaomi's target price by 22% to HK$9.97 and downgraded its rating from "neutral" to "outperforming the market".
Note: This article is the original of Radar Finance (ID: leidacj). Unauthorized reproduction is prohibited.