While the overall mobile phone industry is showing a slowdown, the number of Xiaomi's smart ecosystem devices has surged against the trend. This contrast reveals the company's shift in strategic focus.
Steady operation of mobile phone business
In the third quarter of 2019, facing the existing competition in the global mobile phone market, Xiaomi implemented a multi-brand operation strategy. Targeting different consumer groups, the Xiaomi and Redmi brands developed independently. This strategy effectively optimized the product portfolio and avoided internal competition, allowing both brands to focus on the needs of core users.
In this quarter, the gross profit margin of Xiaomi's mobile phone business increased to 9%, showing a trend of continuous growth. This is mainly due to the improvement of the product structure. In the mainland Chinese market, the average selling price of mobile phones has increased year-on-year. The increase in profitability means that its layout in the mid-to-high-end market has begun to have actual results.
AIoT business leadership
As of the end of September 2019, the number of smart devices connected to Xiaomi's IoT platform has exceeded 210 million. This data does not include mobile phones and computers, thus showing the independent scale of its smart ecosystem. It has a year-on-year growth rate of up to 62%, which proves the strong appeal and expansion speed of the platform.
It should be noted that the deep user group is rapidly expanding. The number of users with more than five Xiaomi smart devices is approaching 3.5 million, an increase of more than 78% compared to the same period last year. These users form the core part of Xiaomi's ecosystem, and their continued investment is a key support for platform activity and commercial value.
Cognitive Advantages of Smart Homes
In the field of smart speakers, Xiaomi has already established a wide range of user awareness. By October 2019, the data presented showed that the number of smart speaker home users in China had reached 35 million. In a survey conducted on brand awareness, Xiaomi Xiaoai Speaker ranked first with an awareness rate of 71%, surpassing many competitors.
High awareness lays a solid foundation for product penetration and, through this, market expansion. Smart speakers are one of the control centers of the home Internet of Things. Their popularity has further boosted the sales and linkage of other smart devices, such as light bulbs, sockets, and home appliances. This has consolidated Xiaomi's entrance position in the smart home market.
Penetrating into the enterprise market
While Xiaomi maintains its leadership in the consumer market, it is embarking on the layout of the industrial Internet. The company has officially launched IoT solutions for hotels, real estate and enterprises, which means that its business is expanding from pure consumer products to more in-depth industry applications.
As far as the enterprise market is concerned, the system has higher stability requirements, higher security requirements, and higher integration capability requirements. When it enters this field, it will be helpful for Xiaomi to polish the technical capabilities of its IoT platform, and it will also be helpful to polish the service capabilities of its IoT platform. It will be able to acquire more stable business customers and open up a new revenue growth curve.
Diversified growth of Internet services
Xiaomi's Internet service revenue comes from increasingly diverse sources. In the third quarter of 2019, emerging Internet business revenue accounted for 37%, and the year-on-year growth was extremely significant. It covers TV Internet, financial technology, and Youpin e-commerce and other businesses, thereby reducing reliance on traditional advertising revenue.
Taking TV Internet as an example, in September 2019, its number of monthly active users had reached 23.9 million, and it has maintained rapid growth. It has a huge user base, which creates huge value for content distribution, membership services, large-screen advertising, etc., causing TV to transform from a hardware product into a platform that continues to provide Internet services.
Rapid expansion of overseas markets
Western Europe has become a highlight area for Xiaomi's overseas expansion. In the third quarter of 2019, Xiaomi's mobile phone shipments ranked fourth in the entire Western European market, with a growth rate of up to 90%. In Spain's public retail channels, its shipments are already in the second position, demonstrating strong channel competitiveness.
This growth does not only rely on entry-level models, but the penetration of mid-to-high-end products is also progressing simultaneously. Market analysis concludes that against the background of global economic fluctuations, products with both performance and price advantages will occupy a mainstream position in the long term, creating external environmental conditions for Xiaomi's market share to continue to increase.
Knowing Xiaomi's dual progress in mobile phone profitability and ecological expansion, do you think the synergy of its IoT ecosystem will reversely transform into the core competitiveness of its mobile phone business in the subsequent period? Welcome to share your views. If you think this analysis is enlightening, please support it by giving it a like.
