Xiaomi Sees Pretty Good Recovery of Smartphone Market in India

The company could be hit with the inventory issues when the market recovers completely

Xiaomi in its earnings call on Wednesday said that the consumer demand for smartphones in India has rebounded post the easing of the lockdown restrictions. The world’s fourth largest smartphone brand reported its results for its first quarter ended March 2020 with Xiaomi posting an 13.6% year-over-year (YoY) increase in its revenues. The company reported revenues of CNY 49.7 billion for its first quarter while its gross profits increased 44.9% to CNY 7.56 billion. Xiaomi said that its smartphone segment generated revenue of CNY 30.3 billion representing an 12.3% YoY growth while its smartphone shipments reached 29.2 million units. The company said that its overseas revenue increased 47.8% to CNY 24.8 billion and accounts to half of its total revenue.

Smartphone Market Rebounds in India

Wang Xiang, president and acting CFO of Xiaomi said in the earnings call that the company “delivered solid results despite the challenging environment.” Xiang said that Xiaomi’s global smartphone shipment increased in the first quarter while the global smartphone market decreased by 13% in the same period.

However, Xiang said that the company felt the COVID-19 impact on its smartphone sales in India but that the market has rebounded.

“In India, for example, the strict lockdown measures imposed in late March significantly impacted sales,” Xiang said in the earnings call. “Since the start of May, India has begun to lift the restrictions on production and sales activities in phases. What we are seeing is that in area where sales have resumed, consumer demand has rebounded in a similar fashion in mainland China.”

The government of India initially enabled e-commerce companies to deliver products in the Green and Orange Zones beginning May 4 while deliveries to Red Zones were allowed from May 18. Xiaomi on May 18 resumed deliveries across India except to those users in the Containment Zones.

Xiang said that the smartphone activations as of the third week of May have rebounded to 90% of the pre-pandemic level in Europe. While the smartphone activations in Southeast Asia and Middle East have “surpassed the pre-pandemic level,” India is said to be around 60% of the pre-pandemic levels.

“In the late March, everything was shutting down because of the government policy, we believe that’s the right strategy for Indian people,” Xiang said. “India, also [the] situation improved a lot in the last maybe 10 days. Right now also, we see probably 50% to 60% of the recovery, activation recovery. So we’ll continue to monitor the progress.”

Xiang said that the company is “working very hard on the market recovery.”

The company in the first week of May introduced its Hyperlocal O2O solution, a “first of its kind initiative” that connected consumers with local retailers. Further, on May 8, Xiaomi introduced multiple devices including the Mi 10 and Mi Box 4K.

“We see a pretty good recovery in India right now,” Xiang said. “I think the key is in late – second half of May and also the June – yes, June. So yes, we remain confident and also monitor the environment very, very carefully. This is what we can do.”

Xiaomi Could Face Inventory Issues

Crucially, Xiang highlighted that the company could be hit with the inventory issues when the market recovers completely as Xiaomi factory has “just reopened.”

“The Indian government just lift the restriction gradually actually,” Xiang said. “So we’re working right now very hard with our manufacturing partners to get the workers back to the factory and help to ramp up the production.”

Xiang said that the company needs to work “very hard on the supply side” as the Indian market has recovered 60% which Xiaomi believes is a “good signal.”

“That’s what we are doing now,” he said. “It takes some time, but we are working very hard on that.”

Xiaomi Dual-Brand Strategy Register “Excellent Results”

Additionally, the company highlighted that the shipments of Mi 10 and Mi 10 Pro have exceeded one million units in mainland China.

The Mi 10 was also made available to Indian consumers earlier in the week with its base variant being priced at Rs 49,999.

Xiaomi said that the average selling price (ASP) of its smartphones increased 7.2% YoY in the first quarter of 2020 while its ASP increased 13.7% in the overseas markets.

“Xiaomi continued to execute its dual-brand strategy, which delivered excellent results, in the first quarter of 2020,” it said on Wednesday. “The Redmi brand continued to introduce highly competitive products at different price points.”

Born in India, Yogesh loves to travel and has lived in multiple countries including New Zealand and Canada. His bylines can be found on various newspapers and blogs throughout the world, including Vancouver Sun, Surrey Now-Leader, Daily Hive , Investing News Network and Rach F1.

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