Xiaomi's 2023, Lu Weibing's three puzzles

Xiaomi's last good time was 2019.

At that time, Xiaomi was full of ambition: the growth rate of overseas markets increased rapidly, even accounting for half of Xiaomi's total mobile phone sales, and overall sales rose steadily, recording a year-on-year sales surge in many quarters. Xiaomi also started from 2019, opened the high-end road of the brand: the Xiaomi CC9 Pro released that year won the first overall score of the smartphone camera released by the camera evaluation agency DXO for the first time, and Xiaomi's excitement is difficult to hide - the DXO No.1 word listed in the light row of the Xiaomi Science Park building is also the epitome of the era of domestic smartphone manufacturers generally "hitting the high-end" that year.

This year, Lei Jun began to recruit a number of former executives of mobile phone manufacturers for Xiaomi from the outside world, this lineup dubbed the "Avengers" by the outside world: not only former Lenovo vice president Chang Cheng, but also Yang Tuo from Meizu, Nubia co-founder Miao Lei, Pepper mobile phone founder Wang Xiaoyan, and Lu Weibing, who was originally the president of Gionee.

But at that time, no one could have imagined that Lu Weibing would become the president of Xiaomi Group in less than three years, and he was also the fastest promoted executive in Xiaomi's history.

No one thought that in 2022, three years later, Xiaomi will face a difficult test at the same time in both impacting the high-end and maintaining sales growth - some former Xiaomi people used the trough period encountered by Xiaomi in 2016 to describe the current situation - revenue and profit have both declined, the impact on the high-end has not yet been completed, and the low-end business of the basic disk has been greatly squeezed by competitors. Perhaps Lu Weibing is the one who "was in danger".

The tough road to hitting the high-end

Impact on the high-end is the most important part of the Xiaomi Group's strategy today: Lei Jun once shouted the slogan of "products and experience fully benchmarking the iPhone" when the Xiaomi 12 was released, even in the Xiaomi 13 conference that has just passed less than a month, Lei Jun has shouted the slogan of "impacting the high-end" dozens of times.

Among Xiaomi fans, there is a proper noun: "Mi Chong High Key Year", used to spit on Xiaomi's propaganda, every year is the keynote of "Impact High-end Key Year".

"Key year" may only be a marketing concept, but if you really want to complete the high-end transformation of the brand, it is almost a comprehensive service test for a mobile phone manufacturer: the part closest to the user and the strongest user perception may be after-sales service.

Since 2021, the core product in Xiaomi's high-end strategy, the flagship mobile phone of that year, the Xiaomi 11 series, users have begun to report problems such as "serious heat", "Wi-Fi unusable" and more serious "unable to turn on".

The number of cases has grown rapidly, quickly evolving from a small word-of-mouth storm to a storm that Xiaomi did not expect.

In this regard, the solution given by Xiaomi is that "users with doubts" can apply for a half-year extended warranty service on their own. At the same time, the channel for users to directly replace the problem is closed, and only support maintenance by replacing the motherboard. These measures, which seemed controversial even at the time, set the stage for a year-long problem.

In December last year, the power plant reporter consulted the person in charge of the Xiaomi after-sales maintenance center on this matter, and the explanation was that "various problems caused by the subsequent (due to) the motherboard have been completely solved", but at least a number of Xiaomi 11 users have similar problems after replacing the motherboard.

Since the Xiaomi Mi 11 is a Xiaomi flagship model launched in 2021, by mid-2022, most buyers have passed the one-year warranty period, and there is no real feasible large-scale solution to this problem. There are various measures to deal with the same problem in various places. A series of actions that eventually led to the Xiaomi Mi 11 problems such as Wi-Fi / freeze due to motherboard problems broke out again in the network in 2022.

In 2022 alone, the topic of "Xiaomi 11 repeated explosion quality problems" has appeared on Weibo hot search three times, and even the news of Xiaomi 11 users' collective rights protection has appeared many times, which has brought great damage to the reputation of Xiaomi's digital flagship, which focuses on high-end flagship mobile phones.

This event lasted for a year of fermentation, and even had an impact on the subsequent Xiaomi 12 / 13 release. Nowadays, searching for related topics on Weibo, you can even see the feedback of many users on this issue recently.

The final defeat of Xiaomi 11 hitting the high-end has taught Xiaomi a heavy lesson in the road to brand premiumization, and also sounded the alarm for Xiaomi: if you want to stand firm in high-end brands, you can not only rely on the "cost-effective products" emphasized by Xiaomi in the past, and the quality control of mobile phones and even the perfection of the after-sales system are directly determined whether a brand can support the high-end evaluation dimension.

Only from the new action of Xiaomi in 2022 in the field of mobile phone photography: the new machine stopped testing DXO brush camera evaluation scores, and Leica co-branded, it is not difficult to see Xiaomi's strategic adjustment in 2022 for the high-end of the brand.

In the press conference after the release of the 22Q3 earnings report, Wang Xiang, then president of Xiaomi, stressed to reporters that Xiaomi will not use short-term results to judge the success of Xiaomi's impact on the high-end.

"We have strategic patience and don't expect to completely win the high-end market with one or two products."

Brand premiumization is a protracted battle, and now Xiaomi finally recognizes this.

Sales that desperately need to be rescued are declining

On November 23, 2022, Xiaomi's 22Q3 earnings report was released.

In the third quarter of 2022, Xiaomi's revenue was 70.474 billion yuan, a year-on-year decrease of 9.7%; Adjusted net profit was RMB2.117 billion, down 59.1% year-on-year.

Its business in all sectors also showed a downward trend: Xiaomi's smartphone business revenue was 42.5 billion yuan, a year-on-year decrease of 11.1%; Internet of Things and consumer products revenue of 19.1 billion yuan, down 9% year-on-year; Internet service revenue was RMB7.1 billion, down 3.7% year-on-year; Other revenue was $1.8 billion, down 6.6% year-over-year.

Compared with the overall business data, perhaps a more intuitive problem is the change in smartphone sales: in the third quarter of this year, Xiaomi's global smartphone market shipped 40.2 million units, down 8.4% year-on-year. Adjusted net profit was RMB2,117 million, down 59.1% year-on-year.

As Wang Xiang said, Xiaomi will not collapse because of the failure of a lack of a high-end model, nor will it rise overnight because of the success of a high-end flagship, but now Xiaomi's real core competitiveness is still a cheap model led by Redmi.

In fact, Xiaomi's current situation can even accept the failure of several more flagship mobile phones to hit the high-end, but it cannot accept the basic disk - the current situation that the cost-effective model market is encroached upon by other mobile phone brands.

Nowadays, when analyzing the resistance encountered by Xiaomi to hit the high-end, they will cite Xiaomi's once classic 1999 pricing, trying to explain that it was Xiaomi's cost-effective models and even the entire brand positioning, making today's Xiaomi brand high-end strategy more bumpy.

But these arguments are easy to forget the fact that if Xiaomi had not passed the cost-effective strategy in the early days, quickly shortening the gap with international giants such as Samsung in the market, there would not even be Xiaomi today.

For today's Xiaomi, in addition to the "impact the high-end" slogan shouted by Lei Jun, another more pragmatic question in front of us is: how to recapture the low-end machine market belonging to Xiaomi?

Lei Jun built a car, and the "newcomer" went into battle

For Lei Jun himself, car building has become a top priority, the first engineering vehicle has passed a number of production tests in early October last year, and even a number of test cars of Xiaomi car coupe models were reported near the Xiaomi Science and Technology Park earlier this month. Lei Jun has also repeatedly held Weibo votes, seeking what netizens think is the most suitable price segment for Xiaomi's first car.

Perhaps for Lei Jun himself, he can still be a product manager and engineer at the forefront; But for today's Xiaomi, there is still a long way to go before the car is mass-produced and profitable.

According to the plan, it should have been Xiaomi's mobile phone business to continue to transfuse blood to the car manufacturing business to help it through the most difficult start-up stage: according to the data disclosed in Xiaomi's financial report, Xiaomi's investment in the car manufacturing business in 2022 from the first three quarters was 425 million, 611 million, 829 million yuan, the speed of burning money is growing rapidly, "Power Plant" has previously reported that the progress of Xiaomi cars is significantly slower than expected, and the pressure on Xiaomi's mobile phone business is increasing.

Lei Jun directly leads the team on the car, and the dangerous mobile phone business needs a person who can stabilize the military and be able to do this, at this time, Xiaomi's choice will not only determine the next high-end road of Xiaomi products, but also directly affect the overall sales.

At the end of December, 61-year-old Xiaomi president Wang Xiang retired, another veteran who left Xiaomi after Li Wanqiang, Huang Jiangji, Zhou Guangping, and Cui Baoqiu.

At the same time, the other two Xiaomi co-founders, Hong Fenghe, the soul of the MIUI operating system, and Wang Chuan, who achieved the first market share with the Xiaomi TV business, will also withdraw from the front line of the business this year.

Among Xiaomi's eight co-founders, only Lei Jun is still on the front line.

The old man faded out one after another, and the one who took over the first position of Xiaomi is Lu Weibing, who is only 47 years old and is currently Xiaomi's youngest partner.

Lei Jun also said in an internal letter: "The series of news shared today is of milestone significance to Xiaomi."

"This announces that Xiaomi's management has achieved a smooth iteration and is ready for continued development in the future."

Even though Lu Weibing was the president of Gionee before joining Xiaomi, in the eyes of some Xiaomi people, he is still a "newcomer" who joined Xiaomi in 2019, and the too rapid "triple jump" promotion has made some people still have questions about whether he can stand up for Xiaomi before the car goes public.

A former Xiaomi employee believes that Lu Weibing is a person with real business ability, and he has brought three Redmi models into the list of the world's top ten best-selling smartphones, which has impressed many doubters of its ability.

But there are still some people who believe: Lu Weibing's success in Redmi is more based on Redmi itself still focusing on the route of high cost performance + low price and volume, and no one can guarantee that Lu Weibing's appointment can lead the Xiaomi flagship series priced at 4000-7000 yuan to a higher level in sales.

The arguments of these former Xiaomi employees are: the Redmi Note 7 series, which really opened the road to rapid growth and exceeded 15 million units in sales in only six months, was released only eight days after Lu Weibing entered Redmi, so the most important product and brand strategy definition part can hardly be called Lu Weibing's credit.

In addition to sales, the most important achievement when introducing Lu Weibing in the past - helping Xiaomi pull through online and offline sales channels, has become the part that drags down Xiaomi as a whole under the trend of weak sales in the overall market this year.

In the third quarter of 2022, Xiaomi's smartphone business line saw a year-on-year revenue decline of 11.1%, the largest decline among Xiaomi's three business lines. Counterpoint, an analyst agency, reported that Xiaomi's lack of offline channels relative to OPPO and vivo affected its sales.

But in any case, at this time, Xiaomi has begun a change in the organization of the first and second generations of management in the throes: a younger team of professional managers led by Lu Weibing has begun to take over the heavy responsibility.

In the new year, Xiaomi's "brand premiumization" and "stabilizing sales basics" two completely different stories will be written by Lu Weibing.

Reporter Daniel Zhang Yi, editor Gao Yulei