Caixin
Jul 11, 2017 06:43 PM
BUSINESS & TECH

Xiaomi on Comeback Trail With Record-Breaking Quarterly Sales

Xiaomi Inc. says its second-quarter sales jump resulted in part from integrating traditional brick-and mortar stores into its business model. Above, consumers shop at a Xiaomi store in Shanghai on May 28. Photo: IC
Xiaomi Inc. says its second-quarter sales jump resulted in part from integrating traditional brick-and mortar stores into its business model. Above, consumers shop at a Xiaomi store in Shanghai on May 28. Photo: IC

(Beijing) — Chinese electronics maker Xiaomi Inc. has once again embarked on a trajectory of rapid growth after a two-year business overhaul amid weak smartphone sales.

The company’s quarterly smartphone shipments hit a record high in this year’s second quarter, said co-founder and Chief Executive Lei Jun. It shipped 23.16 million smartphones in the second quarter, a 70% increase from the same period last year.

“To date, no other smartphone company globally has been able to resume growth after a decline in sales,” Lei said in an internal letter to employees dated July 7.

With strong growth in its early days, 7-year-old Xiaomi was once the world’s most valuable startup — valued at $45 billion at the end of 2014. But its core smartphone sales stalled thereafter.

At the beginning of 2015, Lei set an ambitious target for smartphone sales: 100 million units for the year. But it ultimately shipped 71 million units. Smartphone sales further declined 25% year-on year to 53 million units in 2016, according to data tracking firm IDC.

Lei said 2016 was “a year of setbacks,” and was “the most challenging” period in Xiaomi’s history.

But the weak performance turned around in early 2017. It reported impressive growth for the first quarter by shipping 14.7 million smartphones, representing a 25.5% year-on-year increase.

The recovery is the result of a two-year internal recalibration, which revised several components of the company’s business model, Lei said.

Xiaomi identified innovation as a priority, and decided to develop its own chipset. It unveiled its first self-developed chip in February, becoming the fourth smartphone maker in the world capable of making such chips, after Apple Inc., Samsung Group and Huawei Technologies Co. Ltd.

Last year, the company applied for 7,071 patents around the world, and was granted 2,895, Lei said.

Also contributing to the sales jump was the company’s readjusted retail sales strategy. To reach more consumers, it shifted from an online-only sales model to one that integrated internet ordering with traditional brick-and mortar stores.

As of Friday, Xiaomi has opened 123 Mi Home stores across China, Lei said. The company announced a plan in February to open 1,000 stores over the next three years.

The company’s three years of investment in foreign markets also benefited its sales. Lei noted there was “explosive growth” in its global business. In its second largest market, India, revenue surged 328% year-on-year in the first half of the year, making Xiaomi the second largest brand in the Indian smartphone market.

Lei said he was confident in achieving a revenue goal of 100 billion yuan ($14.7 billion) for 2017.

He set another “humble” goal of shipping 100 million smartphones in 2018. By comparison, Xiaomi’s major rival Huawei shipped 140 million units globally in 2016.

Contact reporter Song Shiqing (shiqingsong@caixin.com)

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