Xiaomi's mid-range battles for price-performance again

Image source: @VisualChina

Text|Another mirror, author|Zheng Haojun, editor|Chen Yanxu

In the context of the decline in global mobile phone sales, the competition of mid-range mobile phone manufacturers is still in full swing, and the Xiaomi sub-brand Redmi and OPPO sub-brands OnePlus are full of gunpowder in brand promotion.

On March 28, Xiaomi released the Redmi Note 12 Turbo, which is more cost-effective than before, claiming to "break the 1TB bottom price". Turbo is a new product line of the Note series, positioned higher than Pro, with more emphasis on performance and experience.

Lu Weibing, president of Xiaomi Group and general manager of Redmi brand, said: The mid-range is not the mean, but the mainstay, and the emergence of Turbo is to accelerate the popularization of the flagship experience and lead the new pattern of the mid-range.

Redmi Note 12 Turbo price from 1999 yuan, behind the Redmi Note 12 Turbo more cost-effective, may mean that Xiaomi chooses to ensure the price and increase the scale of users. According to data released by CINNO Research in May 2022, Redmi sales accounted for 83.6% of Xiaomi's total sales.

Lu Weibing said in the latest earnings call that in 2023, Xiaomi will launch a new business strategy of "both scale and profit". Xiaomi will carry out refined management of profit targets, pay more attention to risk control, and remain cautiously optimistic about the future.

However, improving the cost performance is also a dangerous move, if the opponent follows the price reduction, Xiaomi will not only fail to achieve the purpose of increasing the scale of users, but will fall into the quagmire of price war, resulting in a decline in the company's overall gross margin.

It is worth noting that although Xiaomi's core data such as revenue, net profit, gross margin, and shipments have declined in 2022, Xiaomi's user scale has reached a new high, which means that the gross profit margin is as high as more than 70%, and the Internet service business still has some room for growth.

In December 2022, the number of monthly active users of MIUI worldwide reached 582 million, a year-on-year increase of 14.4%. By the end of 2022, the number of connected IoT devices (excluding smartphones, tablets and laptops) on Xiaomi's AIoT platform reached 589 million, a year-on-year increase of 35.8%.

According to the financial report, in 2022, Xiaomi's revenue will be 280 billion yuan, down 14.7% year-on-year; the net profit attributable to the parent was 2.474 billion yuan, down 87.21% from the same period last year; adjusted net profit was 8.518 billion yuan, down 61.4% year-on-year; Gross profit margin decreased from 17.7% in 2021 to 17.0%; Global shipments were 150 million units, down 20.9% year-on-year. According to IDC data, global smartphone shipments in 2022 will be 1.21 billion units, down 11.3% year-on-year.

The new machine is cost-effective

On the evening of March 28, Redmi released the Redmi Note 12 Turbo, which was first equipped with the second-generation Snapdragon 7+, and once again hit the cost performance.

Redmi Note 12 Turbo is divided into four versions: 8GB+256GB, 12GB+256GB, 12GB+512GB, and 16GB+1TB, priced at 1999 yuan, 2199 yuan, 2399 yuan and 2799 yuan respectively. After superimposing the first sale discount, the prices are 1999 yuan, 2099 yuan, 2299 yuan and 2599 yuan respectively.

Redmi Note 12 Turbo Harry Potter Edition is 12GB+256GB and costs 2399 yuan. The body is based on the Hogwarts School of Witchcraft and Wizardry logo and has a custom theme. The SIM pin, manual, phone case, sticker, charger, and data cable in the box are all customized.

Redmi Note 12 Turbo has power in performance, heat dissipation, screen, and appearance design, and also supports OIS optical image stabilization in terms of camera.

In terms of performance, Redmi Note 12 Turbo is first equipped with the second-generation Snapdragon 7+, which is the same as the previous generation flagship Snapdragon 8+, including the same TSMC 4nm process, the same flagship CPU architecture, the same GPU architecture, the same image ISP architecture and the same LPDDR5 + UFS3.1, with a comprehensive performance score of more than one million.

In terms of screen, Redmi Note 12 Turbo is equipped with a 6.67-inch OLED straight screen, with a border width of only 1.42mm, a chin of 2.22mm, and a screen-to-body ratio of 93.4%; Resolution 2400x1080, global excitation brightness 1000nit, 120Hz variable refresh rate, support 12bit color depth, 100% DCI-P3 color gamut, 1Redmi Note 12 Turbo0Hz high-frequency PWM dimming. At the same time, the Redmi Note 12 Turbo removed the screen bracket this time, and the fuselage was 7.9mm thick and weighed 181g.

In terms of image, the Redmi Note 12 Turbo rear 64 million pixel ultra-clear main camera, 8 million pixel 120° ultra-wide angle lens, 2 million pixel macro lens, support OIS optical image stabilization; In-sensor Zoom technology is introduced to achieve 2X optical quality zoom.

In other aspects, Redmi Note 12 Turbo has a built-in 5000mAh battery, supports 67W wired fast charging, 45 minutes to 100%, and can be used for 1.33 days. At the same time, it is equipped with X-axis linear motor, stereo dual speakers, NFC, and infrared remote control.

It is worth mentioning that Redmi fully responded to the ACE2 and ACE2V of the benchmark friend OnePlus at the press conference.

For example, in terms of performance, Redmi said that its tuning is better, and the game performance not only exceeds the ACE2V, which is basically the same, but also has certain advantages over the higher-priced ACE2.

Regarding the comparison of Redmi at the press conference, Li Jie, president of OnePlus China, responded that "OnePlus's explosive growth has indeed put pressure on some people."

In fact, this is not the first time Redmi has been on the bar with OnePlus. At the beginning of February this year, OPPO's OnePlus brand released the ACE 2 model, featuring the "ultimate cost performance", equipped with a Snapdragon 8+ processor, and the starting price of the 12GB+256GB model was 2799 yuan, which was 200 yuan lower than the Redmi K60 model with the same configuration.

Redmi is also happy to fight. On February 13, Lu Weibing announced on Weibo that the Redmi K60 512GB version officially announced a price reduction of 300 yuan and provided price insurance to old users. He also said, "The ultimate cost performance, Redmi called and practiced for so many years, there are friends in history to follow but difficult to adhere to".

Then Li Jie said, "The mobile phone whose product is not good, without sincere price reduction, is powerless", "We will not sacrifice configuration and experience to obtain profits".

This time, Redmi pointed the finger at the OnePlus ACE 2 series model at the Redmi Note 12 Turbo conference, which is another response to competition.

CNY 3.1 billion was invested in automobiles throughout the year

The reason behind such-for-tat confrontation between mobile phone manufacturers is mainly that the mobile phone market has fallen into recession. According to the China Academy of Information and Communications Technology, domestic smartphone shipments in 2022 will be 264 million, down 23.1% year-on-year. According to IDC data, global smartphone shipments in 2022 will be 1.21 billion units, down 11.3% year-on-year.

In terms of Xiaomi, the company's revenue and net profit in 2022 both declined. revenue was 280 billion yuan, down 14.7% year-on-year; the net profit attributable to the parent was 2.474 billion yuan, down 87.21% from the same period last year; adjusted net profit was 8.518 billion yuan, down 61.4% year-on-year; Gross margin decreased to 17.0% from 17.7% in 2021.

In terms of shipments, Xiaomi's decline was greater than that of the industry as a whole. According to the financial report, Xiaomi shipped 150 million units worldwide in 2022, down 20.9% year-on-year from 190 million units in 2021.

At present, Xiaomi mainly has three major businesses: smart phones, IoT and consumer products, and Internet services. Among them, Xiaomi's smartphone business saw the largest decline in revenue in 2022, down 19.9% year-on-year to 167.217 billion yuan; IoT and consumer products business revenue was 79.79 billion yuan, down 6.1% year-on-year; Internet service revenue was 28.321 billion yuan, a year-on-year increase of 0.4%.

According to the financial report, Xiaomi's Internet service revenue growth in 2022 is mainly due to the increase in TV value-added services, advertising business and game business revenue.

In 2022, the gross profit margin of Xiaomi's mobile phone business fell from 11.9% in 2021 to 9.0%; The gross profit margin of IoT and Consumer Products increased from 13.1% in 2021 to 14.4%. The gross profit margin of Internet service business decreased to 71.8% from 74.1% in 2021.

In addition, Xiaomi continues to invest resources in the automotive business. According to the financial report, in 2022, Xiaomi's R&D expenditure will be 16 billion yuan, of which 3.1 billion yuan will be spent on innovative businesses such as smart electric vehicles, accounting for 19.3%. At present, the size of Xiaomi Auto's business team is about 2,300 people, and Xiaomi Auto continues to maintain its mass production target in the first half of 2024.

Under the strategy of "paying equal attention to scale and profit", Xiaomi's products may respectively undertake the task of expanding scale and improving profits. Xiaomi said that the high-end strategy should continue, relying on high-end mobile phones with higher profit margins to improve the overall profit margin of the mobile phone business.

In the case of the decline in the overall shipment volume of the mobile phone market and the increasingly fierce competition among peers, Xiaomi chose to further increase its price competitiveness in the main shipment range of 2,000 yuan to 3,000 yuan, hoping to maintain or even expand the scale.

This choice may adversely affect the gross profit margin of Xiaomi's smartphone business, but with the scale of users, the Internet service business with a gross profit margin of more than 70% has more room for growth, which may be the key to Xiaomi's response to market changes.