Xiaomi mobile phone shipments plummeted, is Lu Weibing taking the baton or taking over the pot?

On March 24, Beijing time, Xiaomi released its Q4 and full-year financial reports for 2022. Xiaomi's total revenue was 280 billion yuan, a decrease of 14.7% compared with 2021.

In Q2 and Q4 of 2021, Xiaomi's single-quarter revenue was more than 80 billion yuan, the revenue in the first three quarters of 2022 was 73.4 billion yuan, 70.2 billion yuan, and 70.4 billion yuan, respectively, and Q4 revenue was 66 billion yuan, down 6.2% month-on-month, and it failed to achieve a significant rebound with the help of Double 11. Mobile phone revenue was RMB167.2 billion, down 20% from 2021.

Xiaomi's mobile phone revenue accounted for 59.7% of the total revenue and remained the most core business. One of the main reasons for the decline in mobile phone revenue was the decline in shipments.

Canalys data shows that compared with 2021, global mobile phone shipments fell by 12% last year, and Xiaomi fell by about 20%, higher than the broader market.

Although it maintained its third position in the world, its market share fell to 13% from 14% in 2021. Cunterpoint data shows that in January this year, Xiaomi shipped 11.87 million units, with a market share of 11.9%.

Another major factor in the decline in mobile phone revenue is the lack of high-end results.

As of the end of Q4, Xiaomi mobile phone ASP reached a record of 1111 yuan, but it failed to play a significant hedge against the decline in shipments.

Over a long period of time, since its ASP exceeded 1,100 yuan for the first time in Q2 2020, Xiaomi has fluctuated around this figure for ten consecutive quarters.

As one of the core businesses, the revenue of the IoT business in 2022 was 79.8 billion yuan, down 6.1% from 2021.

The main businesses are weak, and Xiaomi Auto's preparation time is only one year. Lu Weibing, who took office at this time, is he taking over the baton, or is he taking over the pot?

The tactics of the sea of aircraft rushed high and encountered obstacles

Affected by the global macroeconomy, consumer demand weakened, and global mobile phone shipments fell by 12% last year. Sales of high-end products are an important criterion for measuring the performance of manufacturers.

Lei Jun said that "the annual sales of the 12S Ultra have been sold out in advance", and Xiaomi Wang Teng said that the 12S Ultra "has not been reduced in its life cycle."

In the past two years, Xiaomi's digital Ultra series has achieved a certain degree of market recognition, and the 12S Ultra launched last year has become a milestone work of Xiaomi's high-end, not only joining hands with the traditional image manufacturer Leica, but also equipped with the well-known Snapdragon 8+Gen1. It went on sale in the middle of last year, and the official website showed that it was out of stock at the beginning of January this year.

At present, the user replacement cycle has been as long as 43 months, and the decrease in purchase frequency is caused by global economic factors, not mobile phone manufacturers.

Improving the profit generated by a single purchase and hedging the loss caused by the decrease in shipments are necessary measures for manufacturers.

Xiaomi's shipments last year were among the top three in the world, behind Samsung and Apple. Of the ten best-selling phones in the world last year, eight were from Apple and two by Samsung. The Xiaomi 12S and regular digital flagship models that were "sold out in advance and did not reduce prices" were not on the list.

Xiaomi phones still feel inadequate in the high-end market.

In addition to the MIX series, folding screen series, Xiaomi also has a digital series of small cups, large cups (Ultra). The large and small cup products are sold in batches, which objectively makes people feel that Xiaomi's flagship models are iterated frequently.

The vivo X series and OPPO Find X series have not extended to a higher positioning model, but are sold at one time.

From massive models to a streamlined lineup, Samsung is the only mobile phone manufacturer that can barely compete with Apple in the high-end market in recent years. This seems to be able to show that the model is not directly related to the high-end.

The large number of models means that more energy is needed in design and innovation, otherwise the product is difficult to shine and the differentiation is not enough.

Taking Xiaomi Mi 12 and Mi 12S as an example, in addition to updating the processor according to Qualcomm's rhythm, the two models lack obvious differences.

After actively embracing the second generation of the MIX series with a full screen, the current innovation intensity has gradually declined, and the significant difference of MIX4 is only the under-screen camera.

The most differentiated model that Xiaomi sold last year was only the 12S Ultra, which was equipped with a 1-inch outsole and IP68 dustproof and waterproof capabilities. Large cups and small cups are developed and sold, and small cup users can also look forward to small cup promotions when large cups are launched.

Over time, it is easy to cause a wait-and-see mood.

Apple's high-end new products are only every fall, and the following spring only pushes new colors for high-end models or SE series for mid-range; Huawei P series is launched every spring, Mate series is autumn.

High-end brands recognized by the market do not launch high-end products frequently, and the rhythm is clear.

If you follow the rhythm of Qualcomm, the flagship product is launched at least twice a year, plus the irregular MIX series and digital Ultra series, Xiaomi's flagship new products are numerous, and the rhythm is not clear.

Flagship products with higher prices have been sold for half a year and diving discounts, which is the essential reason for the increasing number of "waiting for the party" in recent years. Xiaomi 11 Ultra's popularity last year has not decreased, precisely because of its diving price of 3999 yuan.

Android manufacturers do not have the ecological uniqueness of Apple's iOS, and for users, the significant difference between each product lies in the hardware. One change in half a year, so that the homogenization is relatively serious and the old model quickly loses competitiveness, and can only reduce the price promotion.

The old model squeezes the sales of the new model, and it is difficult for the new model to obtain users to the greatest extent in the first time, and then become the old model after half a year, reduce the price and go to inventory, forming a bad cycle.

Although Xiaomi mobile phones have successively launched digital Ultra series and folding screen series in recent years, its ASP has fluctuated around 1100 yuan for ten consecutive quarters, and there has been no breakthrough.

At present, most mobile phone products are seriously homogenized and are not irreplaceable. The tactics of Xiaomi mobile phones provide customers with more cost-effective solutions for purchasing high-end models.

Folding screen sales have also been squeezed to a certain extent.

Folding screen market share slashed

Demand weakened and manufacturers were under pressure. The competition of straight flagship has long been intense, and folding screen mobile phones have become an important breakthrough for manufacturers to improve ASP.

According to IDC data, the domestic mobile phone market shipped about 286 million units last year, a decrease of 13.2% compared with 2021. Folding screen shipments were approximately 3.3 million units, an increase of 118% compared to 2021.

Huawei was the brand with the largest domestic folding screen market share last year, reaching 47.4%, a decrease of 1.9 percentage points compared with 2021. Xiaomi only ranked sixth with 6.4%, a decrease of 6.8 percentage points compared to 2021.

The overall market is shrinking, and folding screens are growing against the trend. Compared with Huawei, whose sales decreased by 40% and its overall share fell to 3%, Xiaomi, the third largest in global shipments, still lacks appeal in the high-end market.

Last year, major manufacturers successively launched new folding screen models, due to hinge life, creases, internal and external screen refresh rate and other upgrades, folding screens evolved to a more mature second-generation product.

Compared with the vivo X Fold launched in April, Xiaomi's MIX Fold 2 was late in August. Prior to this, Xiaomi could only use one generation of products to face the second generation of rivals, and the sales of folding screens throughout the year must be affected.

In addition to the late launch of new products, the Matthew effect in the high-end market is prominent, and it is also one of the main factors for Xiaomi's folding screen share.

Apple's high-end market share grew about 6 percent last year to 75 percent. Folding screen mobile phones shipped 14.2 million units worldwide last year, an increase of 43% compared with 8 million in 2021, and Apple continues to expand its high-end market share. The iPhone 14Pro and MAX models experienced supply disruptions during the peak season, otherwise sales would have grown further.

It is not difficult to see that the high-growth folding screen mobile phone is not as incremental as Apple. More and more high-end users choose Apple, which to a certain extent affects the sales of Android folding screen models.

In addition to Apple, only 25% of the high-end market share includes the sales of high-end models such as straight boards and folding screens from other manufacturers. In terms of folding screens, Samsung occupies 80.9% of them, followed by Huawei (11.97%).

It is not difficult to find that last year, the two brands with the largest market share of folding screen mobile phones in the world have launched horizontal folding and vertical folding models, while Xiaomi vertical folding models are vacant.

The current straight flagship mobile phone screen is about 6.8 inches, and the larger body is not portable for most users, especially female users. Perhaps the folding state of the vertical folding screen mobile phone is similar to the cosmetic mirror, and female users have a higher acceptance.

Last year, the sales of vertical folding screen mobile phones accounted for 42.3% of the total sales of folding screens, and Xiaomi's absence missed the market.

Whether it is Samsung or Huawei, the starting price of its horizontal folding screen is more than 10,000 yuan or even 20,000 yuan, which creates sufficient "sinking" space for the lower-priced vertical folding screen.

The starting price of Xiaomi MIX Fold 2 is only 8999 yuan, and the price of 6000 yuan is 12S Ultra. The vertical folding screen model is positioned higher than the straight plate flagship but lower than the horizontal folding model, and its pricing options are not large.

The late launch of the second-generation folding screen, Apple's impact, and the vacancy of vertical folding screen products led to the reduction of Xiaomi's domestic folding screen market share by more than half last year, ranking only 6th and 5th in the world.

In the context of the uncertain global macroeconomic situation and the lack of clear signs of market demand, it is difficult for mobile phone shipments to quickly return to a high level, and high-end is still an important issue for current domestic mobile phone brands.

Compared with the loss of 1 percentage point of global market share, Xiaomi's folding screen products have not yet become its high-end breakthrough, which is undoubtedly a greater loss.

The decline in shipments of mobile phone business and the poor results of premiumization have reduced overall revenue. With only one year left to build the car, the cost has gradually increased.

Xiaomi's R&D expenditure last year was 16 billion yuan, up 21.7% from 2021. In Q4 2020, it exceeded 3 billion yuan for the first time, and last year Q3 exceeded 4 billion yuan for the first time.

The quarterly financial report showed that the investment related to automobile research and development exceeded 800 million yuan, and the full-year financial report once again emphasized that the increase in R&D expenses was mainly due to the increase in innovative business expenses such as electric vehicles. It is reported that Xiaomi plans to spend a total of 100 billion yuan on research and development between 2022 and 2026.

Other expenses for Xiaomi are acquisitions and investments. For example, it acquired DeepMotion Technology for 77.37 million US dollars, and previously invested in Zongmu Technology, led the investment in Hesai Technology and so on.

In addition to obtaining production qualifications, building technology platforms, and subsequent capacity expansion, Xiaomi also needs to continue to expand the Xiaomi ecological chain and strengthen the core competitiveness of Xiaomi Automobile.

Expenses increased, income decreased, and Xiaomi's new coach encountered "hard mode" as soon as he took office.

Take the baton or "take the pot"?

On December 30 last year, Lu Weibing took over as Wang Xiang and was promoted to president of Xiaomi Group. At the same time, he is also the President of China, the General Manager of Redmi, and the President of the International Business Department. At this point, Lu Weibing will manage the Group's mobile phone department, ecological chain department, major appliance department, China region and India region.

Lu Weibing's responsibilities will become greater, and the difficulties he will face will be more. There is not much time left to prepare for car building, and Lei Jun needs to devote himself to car building without distraction. The revenue of Xiaomi's mobile phone and IoT main business has declined, and Lu Weibing's heavy task is to stabilize the base camp.

From the past, Lu Weibing can be described as a great achievement.

After becoming the head of Redmi, Lu Weibing fought a beautiful battle with RedmiNote 7, and the subsequent Note 8 series continued its popularity, and the two models accounted for about one-third of Xiaomi's annual sales in 2019.

Under the leadership of Lu Weibing, Redmi has successively launched the widely acclaimed RedmiK series, quickly making the Redmi brand synonymous with cost performance. More importantly, Redmi has become a solid foundation for Xiaomi. Lu Weibing guarded Xiaomi's "big rear".

This time, Lei Jun handed over the entire base camp to Lu Weibing.

The international economic trend is uncertain, and Xiaomi's main business is weak. A number of institutions predict that Xiaomi's mobile phone shipments will decrease by 8%-10% this year. The objective factor of the decline in shipments is force majeure, and the only way to hedge the shrinkage to stabilize revenue seems to be high-end.

In the past, Lu Weibing's successful experience in Redmi was mainly aimed at low-end products, but now he is facing the problem of breakthrough in the market share of high-end products.

According to Lei Jun and Wang Teng, the 12S Ultra series was sold out in advance without price reduction, and the product power of this model was recognized by the market. In addition to factors such as design and materials, the first to use a 1-inch outsole is the core product strength and differentiation of this model.

This year's flagship has been fully equipped with a 1-inch outsole, Lu Weibing did not catch up with the eve of the big change in mobile phone imaging, Xiaomi 13S Ultra needs to find another exclusive differentiation.

Based on the market performance of the previous model, the 13S Ultra should expand production. The third quarter of last year's financial report data showed that Xiaomi's inventory level began to drop to a safe area. In February this year, news pointed out that Xiaomi's smartphone and parts inventory was about 40-50 million units, about 12-16 weeks.

Xiaomi, which has weak market demand and is expected to shrink shipments, may not easily increase production orders to foundries this year, even for models with a good response to its own market.

Lu Weibing dragged the millet high with one hand, and pressed the inventory with the other.

At present, Xiaomi obviously needs Lu Weibing to have three heads and six arms. Redmi, which had an unshakable position in the field of cost performance in the past, suffered a critical attack from friends at the beginning of the year.

OnePlus Ace2 and Realme GT Neo5 models have been launched successively, forming a front and rear clamp on the Redmi K60 series. The RedmiK60 (12+512 version), which has been on the market for just over 1 month, received a rare discount of 300 yuan with a "Valentine's Day event".

The high-end breakthrough has not yet handed over the work, but the low-end position has fallen into passivity. The global market demand is weakening, and Xiaomi's overall business is under pressure, and it is difficult to reverse the situation. The countdown to the debut of new automotive products has entered the countdown, and the pre- and post-expenditure such as layout, research and development, and expansion is inevitable, and Xiaomi has suffered an "eventful autumn".

And Lu Weibing can be said to be ordered between dangers, and taking over the baton is like "taking over the pot".

Xiaomi can still have high hopes for its new car manufacturing business. The Michain ecology built over the years will provide Xiaomi cars with a variety of profit models other than hardware. Xiaomi's internet revenue last year was 28.3 billion yuan, up 0.4% year-on-year, and new growth is possible with the help of Xiaomi cars.

Car building may not be the current area that Xiaomi is best at, but if you build cars as IoT products, Xiaomi already has rich experience.

Stopping the decline in revenue of the main business is self-evident in the support of Xiaomi's car manufacturing.

Lei Jun, who is expanding new businesses on the front line, also depends on how much firepower Lu Weibing, who shoulders the heavy responsibility of defense, can output.