Xiaomi, the world’s No. 3 smartphone brands after Samsung and Apple, reported a loss of 587 million yuan, or about $88 million, in the first three months of 2022 as fallout from the Covid pandemic and parts shortages hurt business.
The Beijing-headquartered company’s red ink compared with a profit of 7.79 billion yuan a year earlier, Xiaomi said in a statement on Thursday. Sales fell by 4.6% during the period to 73.3 billion yuan.
“The continued supply shortage of key components, resurgence of COVID-19, and global macroeconomic headwinds affected the demand and supply of the overall smartphone market,” Xiaomi noted.
Lockdowns in major Chinese cities including Shanghai and Beijing have wreaked havoc on global supply chains and the country’s economic growth. China is home to the world’s largest auto market, and the impact of lockdown in that industry has been “gigantic,” according to Automobility CEO Bill Russo (see interview here).
Earnings woes have contributed to a 59.4% drop in Xiaomi shares at the Hong Kong Stock Exchange in the past year; they’ve lost about two-thirds of their value since the end of 2020. Xiaomi closed at HK$11.08 on Thursday, above a two-year-low of HK$10.36 on May 12. CEO Lei Jun is still worth $9.4 billion on the Forbes Real-Time Billionaires Index.
Xiaomi, which has more than 10,000 retail locations in China in addition to its online sales, noted the impact of Covid on its offline business in the country. “Recently, the resurgence of Covid-19 in mainland China has softened overall consumption demand and affected the operating schedules and foot traffic of many of our offline retail stores,” it said. “We are actively responding to these challenges and prudently managing our operations to minimize the impact.”
On the brighter side, the company said it sold 19.5 billion yuan of non-phone Internet of Things and lifestyle products in the first quarter, including TVs. Its internet services revenue – which includes advertising and gaming – rose by 8.2% to 7.1 billion yuan in the first quarter “despite the challenges brought by volatility in our smartphone shipments and changes in the regulatory environment in the advertising and gaming industries in mainland China.” International sales accounted for 51.1% of its revenue, up from 48.7% in the fourth quarter.
Xiaomi also said it was continuing to work toward entry into the electric vehicle market. The company said previously it expected a model by 2024, backed by 1,000 research and development staff working on the project to compete in a crowded market with Tesla, NIO and others. China, the world’s largest smartphone market, also leads in global EV sales.
Xiaomi, founded in 2010, has investments in more than 400 businesses, including Nasdaq-listed iQiyi and Kingsoft Cloud Holdings. It ranked No. 291 on the 2022 Forbes Global 2000 list unveiled earlier this month.
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