Chinese brand Xiaomi’s numbers for the third quarter show the impact of the ongoing global component shortages on its balance sheet, putting its smartphone strategy under the scanner, according to a new report.
Revenues grew just 0.5 per cent (on-year) and plunged 19 per cent (on-quarter), while quarterly sales growth was slowest in more than a year.
“All this has prompted many to question Xiaomi’s business strategies. But Xiaomi is already at work, picking areas for improvement and finding ways to tackle external factors,” according to Counterpoint Research.
Globally, Xiaomi experienced the ongoing SoC shortage, as was mentioned in its latest quarterly earnings call.
“Xiaomi’s main shipment contributors are 4G-enabled smartphones, especially those below $300. 4G SoCs also happen to be the ones facing the biggest shortage gap in smartphones,” said Ivan Lam, senior research analyst at Counterpoint.
Xiaomi, with its strong value-for-money and predominantly below-$300 product portfolio, has grabbed a huge market share globally, especially in the past three years.
This is due to two main reasons. First, Xiaomi has managed to take a big share from the local brands, which were mainly getting their supplies from Chinese ODMs and, therefore, lacking in pricing advantage and core competency in software.
“Second, the local OEMs are not in a position to match Xiaomi’s marketing muscle. Therefore, with the right kind of penetration strategy, it can be a very potent mass market alternative,” Lam noted.
But today, other players too are playing the same “internet brand” game as Xiaomi and are close behind.
In Xiaomi’s home country, China, it continued to struggle in the offline market. OPPO and Vivo held more than 65 per cent share in the offline market, while Honor’s strong return meant a huge impact on Xiaomi.
“In Q2 2021, with the big e-commerce festival of “618”, Xiaomi beat expectations. But in Q3 2021, there was no such festival, which led to Xiaomi’s underperformance,” the report noted.