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Xiaomi needs more time to develop chip business, says CEO

China's handset-maker Xiaomi Corp. needs more time to develop its chip business, CEO and Founder Lei Jun said at a March 20 earnings press conference in Hong Kong.

Xiaomi debuted its first processor, Surge S1, in 2017 and has yet to release a second chip. "Xiaomi is still new to [the] chip business," Lei said. Xiaomi's handsets use processors from Qualcomm Inc. and MediaTek Inc. as well as its own chips, Lei said.

Under pressure from U.S.-China trade tensions, Chinese companies have increasingly realized the importance of holding core technologies such as integrated circuits.

Xiaomi's total revenue increased 52.6% year over year to 174.92 billion yuan in 2018 from 114.62 billion yuan in 2017. Gross profit grew 46.4% year over year to 22.19 billion yuan from 15.15 billion yuan in 2017.

The company's revenue from its internet of things and lifestyle products rose 86.9% year over year in 2018 to 43.82 billion yuan and contributed 25.1% of total revenue, up from 20.5% in 2017.

The Chinese smartphone-maker had announced in January that it plans to inject 10 billion yuan into IoT and artificial intelligence development in the next five years. Xiaomi also introduced its "AIoT" strategy, targeting the development of handset and IoT businesses with the same strategic importance.

Xiaomi's smartphone business accounted for the largest chunk of its total revenue in 2018, at 65.1%.

The company's revenue from its smartphones business grew 41.3% year over year to 113.8 billion yuan in 2018, from 80.6 billion yuan in 2017, while the shipment of its handsets reached 118.7 million units, up 29.8% year over year.

Xiaomi launched a multibrand strategy for its handset business in January, aiming to develop its sub-brands including Meitu Inc. for female users.

Looking at the quarterly results, the company posted fourth-quarter 2018 revenue of 44.42 billion yuan, up from 35.11 billion yuan in the prior-year period. Quarterly gross profit jumped to 5.66 billion yuan from 3.64 billion yuan in 2017.

The company reported full-year 2018 EPS of 0.84 yuan, compared to a loss of 4.49 yuan in 2017. The S&P Global Market Intelligence consensus EPS estimate for 2018 was 0.42 yuan on a normalized basis and 0.50 yuan on a GAAP basis.

In a separate press conference March 19, Xiaomi's CFO Shou Zi Chew said the sale of its smart TVs was its main growth driver. The company saw its global shipment of smart TVs grow 225.5% year over year to 8.4 million units in 2018.

Revenue from the company's international markets grew 118.1% year over year to 70 billion yuan. Shipment and sales increased in markets including Western Europe, India and Indonesia, with plans to expand into "more new international markets in 2019," the company said.

As of March 20, US$1 was equivalent of 6.69 Chinese yuan.