Gadgets light up Xiaomi's future

Hong Kong

XIAOMI'S future will be powered by gizmos. The Chinese giant defied a global smartphone slump with a 53 per cent jump in 2018 sales to 175 billion yuan (S$35.2 billion). Bets on cheap-and-cheerful markets such as India are paying off, as is a shift to pricier devices. Boss Lei Jun has internet ambitions, but for now, hardware matters.

Even after a sluggish December quarter, the Beijing-based company swung to a full-year net profit of 13.5 billion yuan, compared to a net loss of 44 billion yuan the previous year. Smartphone sales, which accounted for just under two-thirds of Xiaomi's total, soared more than 40 per cent.

That was no easy feat: last year was brutal for rivals from Apple to Samsung, with global handset volumes falling to 2014 levels, according to data tracker IDC. Shipments in Xiaomi's home market fell as much as 10 per cent year-on-year in the three months to December.

Mr Lei's aggressive push overseas now looks prescient. In India, the only major smartphone market still growing at a healthy double-digit pace, Xiaomi's low-cost models dominate. And the company is making progress in Western Europe at the opposite end, with a flagship model retailing at closer to US$500.

International sales at Xiaomi accounted for 40 per cent of the total in 2018, up from just over a quarter a year earlier.

Promising too is Xiaomi's sideways move into TVs, washing machines, robot vacuum cleaners and the like. Xiaomi's so-called internet of things and lifestyle division raked in 44 billion yuan in annual sales, nearly double from a year earlier. A partnership with furniture giant Ikea, along with Xiaomi's recent pledge to invest at least 10 billion yuan over the next five years here, shows it's serious.

Mr Lei touts his company as a "new species", one that combines hardware and internet services. Both are important in the long term. But with the company's stock trading roughly 45 per cent below last year's peak, Tuesday's earnings show that for now, he would be wise to focus on the gadgets. REUTERS