Source I Netease Technology
Author I Jingzhi
Yesterday, Xiaomi released its 2018 financial report. This is the first annual report since Xiaomi went public. It also happens to be the day when Lei Jun and Dong Mingzhu’s “1 billion bet” expires. If the Gree performance forecast data is not unexpected, Lei Jun will lose the bet with a difference of more than 20 billion yuan.
But after the financial report, Lei Jun’s open letter can vaguely feel that Lei Jun is quite satisfied with this annual report. More importantly, he used the word “proud” to express that the comprehensive after-tax net profit rate of Xiaomi’s hardware in 2018 was Positive, less than 1%, fulfilling the pre-listing promise: Xiaomi’s comprehensive hardware after-tax net profit rate will never exceed 5%.
Lei Jun lost to Dong Mingzhu, but fulfilled his promise.
lost to Dong Mingzhu
Lei Jun and Dong Mingzhu won the 2013 China Economic Person of the Year selection. With the attention of the people across the country, Dong Mingzhu and Lei Jun made a bet: bet on whether Xiaomi’s sales could surpass Gree Electric Appliances within 5 years, and the bet was upgraded to 1 billion. At that time, Xiaomi’s revenue was 31.6 billion yuan, and Gree had exceeded 100 billion yuan. Faced with such a gap, Lei Jun is still willing to accept the bet and can be confident.
However, with the announcement of the 2018 financial report, the result of the bet between Lei Jun and Dong Mingzhu seems to have come out. In 2018, Xiaomi achieved a total revenue of 174.9 billion yuan, a year-on-year increase of 52.6%. Although Gree has not yet announced its financial report for 2018, Gree has released a performance forecast showing that the total operating income for the whole year of 2018 will be 200 billion to 201 billion yuan, and the net profit attributable to shareholders of listed companies will be 26 billion to 27 billion yuan.
This means that when the bet expires, Gree’s revenue is more than 20 billion yuan ahead of Xiaomi, and Lei Jun loses the bet.
Smartphones declined in the fourth quarter
Analyzing Xiaomi’s revenue structure in 2018, we can see that its main source of income is still the mobile phone business.
The report shows that Xiaomi’s mobile phone business revenue in 2018 was 113.8 billion yuan, a year-on-year increase of 41.3%; IoT and consumer goods business contributed revenue of 43.8 billion yuan, a year-on-year increase of 86.9%; Internet service business revenue was 16 billion yuan, a year-on-year increase of 41.3%. An increase of 61.2%, accounting for 9.1% of the overall revenue. They accounted for 65.1%, 25.1% and 9.1% of the total revenue respectively.
The financial report shows that the revenue of Xiaomi’s smartphone segment increased by 7% from 23.4 billion yuan in the fourth quarter of 2017 to 25.1 billion yuan in the fourth quarter of 2018, which was due to the increase in the ASP of smartphones. However, in terms of shipments, in the fourth quarter of 2018, Xiaomi sold 25 million smartphones, compared with about 28.5 million in the fourth quarter of 2017, showing a year-on-year decrease in shipments.
Xiaomi explained that the decrease in shipments was mainly due to the adjustment of the smartphone release plan due to Xiaomi’s product strategy during the reporting period. Xiaomi only released two new smartphone models in October 2018 and at the end of December 2018: Mi Mix3 and Mi Play.
Xiaomi Mix3 itself was not a mass-produced model, but there were many models available in the market at that time: OPPO’s Find X and vivo NEX, as well as new products such as OnePlus 6T and Honor equipped with Kirin 970 were released frequently.
Data from IDC at the time showed that in the fourth quarter of 2018, both Apple and Xiaomi experienced a relatively large decline in the Chinese smartphone market. Apple’s shipments fell by 19.9% year-on-year, and Xiaomi’s mobile phone shipments fell by 34.9% year-on-year.
However, despite the decline in Xiaomi mobile phones in the fourth quarter, revenue has achieved year-on-year growth. The ASP (average selling price) of Xiaomi smartphones was RMB 1,004.7 per unit in the fourth quarter of 2018, compared to RMB 823.9 per unit in the fourth quarter of 2017. According to Xiaomi, the increase in ASP was mainly due to strong sales of mid-to-high-end models and rising international shipments of smartphones in Western Europe.
Fulfilled the promise
Although Lei Jun lost the bet, he won the promise. Before Xiaomi went public, DongThe meeting will pass a special resolution: Xiaomi promises to all existing and potential users that Xiaomi’s comprehensive after-tax net profit margin of hardware will never exceed 5%.
This promise caused quite a stir. On the one hand, consumers lamented that Lei Jun’s price is kind and conscientious, but on the other hand, he was ridiculed by his peers. At that time, Zhao Ming, the president of Honor, said in an interview with the media: “The comprehensive net profit margin of hardware companies in China can reach 5%, which is rare.” So I don’t know how to evaluate this question. As far as we are concerned, the comprehensive hardware net profit We are also very happy that the profit margin can reach this level.
OnePlus Liu Zuohu also said at the press conference that he is very happy to earn 5%.
However, according to the data given in the 2018 financial report, the comprehensive after-tax net profit rate of Xiaomi hardware is positive, less than 1%.
Lei Jun said that this is a great encouragement to Xiaomi, which proves that user interests and corporate income can coexist harmoniously without confrontation: in 2018, while the average selling price and profit of Xiaomi’s mobile phones both increased, Xiaomi can still Adhere to the principle of close to cost pricing, and make good products that “touch people’s hearts and have kind prices”.
Xiaomi has always positioned itself as an Internet company, and compared itself with Internet companies such as Amazon in its pre-listing presentations, and believed that Internet services are the business with the greatest potential for profit growth.
However, judging from the proportion of Xiaomi’s Internet service business in 2018, Xiaomi seems to be far from an “Internet company”. In 2018, Xiaomi’s Internet service business revenue was 16 billion yuan, a year-on-year increase of 61.2%, accounting for 9.1% of overall revenue.
On the other hand, IoT and consumer goods business accounted for a relatively large increase in the proportion of total revenue. In 2018, the scale of Xiaomi’s IoT platform continued to increase, and the number of connected devices (excluding smartphones and notebook computers) on the IoT platform reached nearly 150.9 million, a 14.7% increase from the third quarter. This business generated 43.8 billion yuan in revenue , an increase of 86.9% over last year.
Xiaomi has also upgraded the company’s core strategy to a “mobile phone + AIoT” dual engine. In the next five years, Xiaomi will invest at least 10 billion yuan in all in AIoT. At the same time, Xiaomi also adjusted its organizational structure, appointed Cui Baoqiu as the vice president of the group and the chairman of the group technology committee, and newly established the artificial intelligence department, cloud platform department, and big data department; announced the establishment of the AIoT strategy committee, which belongs to the group technology The committee is responsible for promoting the collaboration of AIoT-related business and technical departments, and promoting the implementation of strategies.
Lei Jun is also aware that Xiaomi is still facing a lot of criticism and doubts, and will unswervingly persist in long-term struggle.
“As long as we don’t change our original intentions and continue to struggle, nothing can stop Xiaomi’s rushing heart.” Lei Jun encouraged.
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