Xiaomi’s sales grew fastest in two years after Huawei’s fall
Xiaomi Corp. posted its fastest pace of revenue growth in more than two years after the Chinese smartphone giant took market share from Huawei Technologies Co. when US sanctions intensified.
The second-largest smartphone name in China reported a 34.5 percent stronger-than-expected sales increase to 72.2 billion yuan ($ 11 billion) in the September quarter. More than half of that comes for the first time from its home country, with Xiaomi taking advantage of Huawei’s pullout to further research markets from Western Europe to India, where it has broadened its lead.
The company has been among the biggest beneficiaries of the Trump administration’s campaign to put the brakes on Huawei and contain China’s technological ascendancy. Its unit shipments jumped 42% in the third quarter globally, estimated researcher IDC, by far the best performance among brands from Samsung Electronics Co. to Apple Inc. Huawei’s volumes fell 22% in the past. this period, and he now has to defend his no .2 stance against the likes of Vivo.
Xiaomi is on track to continue growing its market share thanks to strong demand for budget phones during the pandemic and Huawei’s supply disruptions, China Merchants Securities analysts Kevin Chen and Clint Su wrote before the launch. publication of results. Xiaomi’s competitively priced products are attractive amid economic uncertainties, they said in a note.
Xiaomi, whose shares more than doubled in 2020, reported an increase in adjusted net profit to 4.1 billion yuan from the previous year, beating the forecast by 3.3 billion yuan.
It is one of the few large Chinese tech companies to experience strong growth abroad – and in developed markets, to boot – at a time when governments from the United States to India are erecting barriers to business. from the country. The overseas revenue of Xiaomi’s smaller Internet of Things division, which sells gadgets such as smart stoves and robot vacuums, rose 56.2% in the third quarter. In India, he managed to hang on to the top spot despite a deep nationwide Covid-19 lockdown.
At home, Xiaomi is benefiting from China’s rapid adoption of 5G-enabled smartphones as network rollout accelerates.
What Bloomberg Intelligence says
The continued adoption of 5G phones in China may boost sales from Apple and local brands like Xiaomi, Oppo and Vivo, while Huawei’s restrictions on securing components may put pressure on its shipments.
– Matthew Kanterman, analyst
Huawei this month struck a deal to sell its economy brand Honor to a Chinese government-backed consortium, which could increase competition in the smartphone space. But the threat from Huawei itself is likely to diminish until it can somehow get around the ban on US software and circuits, for example by creating its own Android-based app operating system. .
In the short term, Xiaomi could earn up to 15 million units in additional smartphone shipments from Honor’s release, Citigroup analyst Andre Lin wrote in a note ahead of earnings. But if Honor were to remain a major competitor, Xiaomi’s consensus forecast for 2021 would face downward revisions of 5% to 10% of shipments, Lin said.
Citing national security concerns, the United States has waged a large-scale campaign against Huawei since 2018 that placed its CFO under house arrest in Canada and instigated bans against the use of 5G equipment. the company in countries ranging from UK to Japan. The final blow came when the White House passed sweeping restrictions on vendors this year, closing loopholes that allowed Huawei to source ready-to-use semiconductors to keep its consumer business afloat.
