Xiaomi making the most of the crisis

Despite the uncertain Covid-19 outlook, Xiaomi is getting help from unlikely places

  
A man uses his smartphone next to the Xiaomi brand's store in central Kiev, Ukraine February 11, 2020.

A man uses his smartphone next to the Xiaomi brand's store in central Kiev, Ukraine February 11, 2020.

Reuters/Valentyn Ogirenko

HONG KONG  - Xiaomi is making the most of the crisis. Rolling out a 5G model during China's lockdown paid off for the online-savvy handset maker. First-quarter sales increased 14% from a year earlier, to $7 billion. Serious setbacks for rival Huawei and virus-powered interest in home gadgets should help sustain the impressive growth.

The $30 billion company released its priciest flagship model, the Mi 10, in mid-February. Speaking to an empty audience in Beijing, boss Lei Jun assured online viewers through his surgical face mask that Xiaomi had enough capacity and stock despite travel restrictions, factory closures and supply-chain disruptions. A month later, the company followed up by rolling out more phones for new ultra-fast networks abroad.

Figures released on Wednesday show how it worked. Smartphone revenue hit $4.3 billion in the three months to March, up 12% from the same span in 2019. Xiaomi's e-commerce presence helped: local Mi 10 sales topped 1 million units within the first two months. In the first quarter, total shipments were up nearly 5% to 29 million. That compares to a 13% slump in the worldwide market, according to industry tracker Canalys.

Despite the uncertain Covid-19 outlook, Xiaomi is getting help from unlikely places. The Trump administration has ratcheted up its campaign against telecom-equipment maker Huawei by further restricting the Chinese company's access to U.S. technology and equipment. That should benefit Xiaomi: Huawei's in-house semiconductor unit has long given its smartphone business a big cost advantage over compatriots. As of March, Canalys reckons Huawei's 40% market share at home is well ahead of Xiaomi's 11%.

What's more, Xiaomi's home appliances and gadgets should get a post-pandemic boost. After being stuck indoors for months, consumers may be more inclined to upgrade at home with internet-connected TVs, rice cookers, AI-powered assistants and the like. Online shopping giant Alibaba said this week it would invest $1.4 billion developing its smart speaker.

Xiaomi shares are up by over a fifth since the start of the year, far outperforming the benchmark Hang Seng Index. Its valuation also has recovered to a robust 22 times expected earnings, according to Refinitiv. That’s rude health for sickly times.

CONTEXT NEWS

- Chinese smartphone maker Xiaomi on May 20 reported revenue of 49.7 billion yuan ($7 billion) in the three months to March, an increase of 14% from the same period a year earlier.

- Adjusted earnings, excluding share-based compensation and one-off items, increased 11% to 2.3 billion yuan.

- The company, the fourth largest smartphone maker globally, sold 29.2 million units in the quarter, an increase of 4% from the first three months of 2019.

- Xiaomi shares were up 2% to HK$13.06 during morning trading on May 21.

(Editing by Jeffrey Goldfarb and Jamie Lo) ((robyn.mak@thomsonreuters.com; Reuters Messaging: robyn.mak.thomsonreuters.com@reuters.net))

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