Xiaomi’s net profit fell 52.9% year-on-year

Xiaomi’s first quarter 2022 financial report shows the state of the global smartphone market. Whether or not Xiaomi’s new smart electric vehicle research can be successful has attracted great attention due to the high cost of early-stage research.

Xiaomi released its 2022 first quarter financial report on May 19, 2022. In the report, Xiaomi achieved total revenue of CNY 73.4 billion (USD 10.9 billion), down 4.6% from compared to 76.9 billion CNY (11.5 billion USD) in the first quarter of 2021. Net profit amounted to 2.9 billion CNY (432.2 million USD), down sharply from 6.1 billion CNY (909.1 million USD) from last year. It was down 52.9%, which caught the public’s massive attention. The cost of innovative companies was CNY 425 million (USD 63.3 million), mainly focused on the development of smart electric vehicles.

The 52.9% decline in net profit was mainly influenced by COVID-19, the global smartphone market environment, the purchasing power of target customers, labor and parts costs , and the shortage of essential parts, such as chips. Revenue from the smartphone business line was down 11.1%. Xiaomi concluded that the reasons were mainly affected by the decrease in the production of goods and the increase in the main component costs.

Smartphone segment revenue was CNY45.8 billion (US$6.8 billion), down 11.1% year-on-year. Its gross margin was 9.9%, a difference of 3% compared to 12.9% in the first quarter of 2021. Xiaomi concluded the reasons for the promotions of certain smartphone models. The dynamic compensation policy of the Chinese government has also reduced the purchasing power of large consumers. Therefore, the consumption expectation has been decreased. People tended to put off replacing their smartphones or wait for big discounts on products. Xiaomi might have a huge increase in revenue on the day of the big discount, such as the upcoming 6.18 day.

Whether Xiaomi’s strategy in smart electric vehicles is successful or not has attracted the attention of a large number of investors. And those who care whether the corresponding research cost of this project can be returned or neglected from this quarter’s financial report, are all waiting for this answer.

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