Xiaomi Q3/2019: Growth Rate Dropped Significantly, Selling Smartphones At Higher Price For More Profit

Karamchand Rameshwar - Nov 29, 2019

The Chinese phone maker Xiaomi is said to release affordable 5G smartphones next year, which might be a good way to boost its sales again.

Xiaomi, the world's fourth-largest smartphone manufacturer, has just announced its business results for Q3 / 2019, lasting from early July to the end of September. Although the growth is still slowing down, the results show that Xiaomi is also facing big problems when it wants to switch from smartphone business to service business.

Total revenue in Q3 / 2019 reached 53.7 billion CNY (about Rs. 54,905.1 crore), an increase of 3.3% compared to Q3 / 2018. The growth rate is significantly slowing down, the Q2 / 2019 report achieved an annual growth of 14.8%, while it was only 3.3% in the last quarter.

Sadly, however, smartphone sales fell 7.8 percent to 32.3 billion CNY. In Q3 / 2019, Xiaomi shipped 32.1 million smartphones and it blames the market decline for that.

Although smartphone sales have declined, Xiaomi said its gross profit margin on each smartphone sold increased. In Q3 / 2019 it was 9%, in previous quarters it was only 8% and 3%. Show that Xiaomi is increasingly selling smartphones at higher prices, increasing profits, just like Apple's business strategy.

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Xiaomi is also changing its business strategy to become more like Apple, which is reducing reliance on hardware business and strengthening the service business. However, Xiaomi's services segment is still too small.

Revenue from services grew by 12.3% compared to last year, but still only reached 5.3 billion CNY (around Rs. 5418.9 crore). It accounts for only a small part of the whole business, while the smartphone segment still accounts for the majority.

It can be seen that Xiaomi really wants to learn from Apple's business strategy, but it has not been successful. Chinese manufacturers are still heavily dependent on the hardware business. And Xiaomi's next strategies are also focused on hardware, such as expanding sales in overseas markets, launching a lot of new 5G smartphones in 2020.

Separately, the brand is expected to launch the Redmi K30 early next month as a successor to the popular Redmi K20 series.