Xiaomi's smartphone business hit with worst quarter ever in China, could India be next?

In what could be bad news for Chinese smartphone maker Xiaomi, the company has posted its quarterly results, indicating the slowest-ever growth in terms of sales. These results were confined to Xiaomi's performance in the Chinese market for Q3 2019. Xiaomi's sales are declining in China but at the same time, rival Huawei's market share is on the rise.

Xiaomi's quarterly smartphone business declined 8 per cent to 32.3 billion yuan. Between July - September 2019, Xiaomi managed to sell about 32.1 million phones during, roughly one million units fewer than the same period last year.

However, Xiaomi's total revenue rose 5.5 per cent to 53.66 billion yuan from the same period last year. Xiaomi is focusing on foreign smartphone markets, amid sales drop at home. But while achieving that, Xiaomi's selling and marketing expenses rose 16 per cent in Q3 2019.

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What could be the reason for this decline?

In China, demand for smartphones has declined since most consumers tend to hold on to their devices for longer. But for some reason, this situation doesn't seem to be affecting Huawei's market share. In fact, Huawei's market share continues to boost sales revenue for the world's second-largest smartphone maker.

Despite expanding its business into other areas, most of Xiaomi's revenue still comes from mobile phones. So it will be interesting to see how Xiaomi copes with this 'decrease' in demand for smartphones at such a crucial time.

Meanwhile, Xiaomi has also been promoting its internet services division, which primarily consists of online ad sales. But it accounts for only 10 per cent of Xiaomi's total revenue.

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"If you look at the Chinese smartphone market in the past two years, it is true that there has been some decline, and recently we have also seen some pressure in the market," Xiaomi’s Chief Financial Officer Chew Shou Zi said on an earnings call. "Once the 5G era is with us, then I believe we will start to see improvement in the smartphone market quite significantly."

Last month, Xiaomi CEO Lei Jun said the company would release more than 10 5G phones across different price segments in 2020.