China's Xiaomi Corp. reported a 5.8% drop in smartphone revenue share in the first quarter ended March 31, amid its strategic conversion to the internet of things business, according to the company's earnings report.
The handset-maker's revenue from smartphones accounted for 61.7% of the total for the period, compared to 67.5% in the same period last year. The revenue from IoT and lifestyle products accounted for 27.5% this year, compared to 22.4% last year. IoT and lifestyle products include smart TVs, air purifiers and electric scooters.
As global smartphone shipments are forecast to decline, Xiaomi has been shifting focus to its IoT businesses. The company spun off part of its mobile chip development unit in April to create a new team to focus on IoT chip research and development.
Indeed, Xiaomi's global shipment of smartphones dropped. The company sold about 27.9 million smartphones during the period compared to 28.4 million units in the first quarter of 2018. However, Xiaomi's revenue from smartphones grew 16.2% year over year to 27.01 billion yuan in the first quarter, from 23.24 billion yuan, driven by increased average selling price.
The company reported a 56.5% year over year increase in revenue from IoT and lifestyle products in the reporting period, from 7.70 billion yuan in the 2018 quarter to 12.04 billion yuan, mainly due to growth in demand for smart TVs, wearable devices and electric scooters.
Meanwhile, Chew Shouzi, CFO of Xiaomi, said on a May 20 earnings call that Google LLC's suspension of services to Huawei Technologies Co. Ltd. and the U.S.-China trade war have had a limited impact on Xiaomi. "We have been tightly following the situation," he said. "Xiaomi has been developing MIUI and we will prepare ourselves for potential risks," he added.
MIUI, Xiaomi's operating system that debuted in 2010, reported a 37.3% increase in monthly active users to 260.9 million people in March 2019, from 190.0 million in March 2018. The operating system is based on Google's Android operating system.
Additionally, Xiaomi's internet services generated 4.3 billion yuan in the first quarter of 2019, a year-over-year increase of 31.8% from 3.2 billion yuan. Online games, online education and mobile payments were the main drivers in this sector. Xiaomi and AMTD Group Co. Ltd.'s joint venture, Insight Fintech HK, got an online banking license from the Hong Kong Monetary Authority earlier in May after it launched mobile payment tool Mi Pay in India in March.
Furthermore, revenue from international markets contributed 38.4% of Xiaomi's total revenue in the first quarter of 2019, compared to 36.2% year over year. India and Western Europe were the focus of Xiaomi's development.
Xiaomi's total revenue grew 27.2% year over year to 43.76 billion yuan in the quarter to March 31, from 34.41 billion yuan in the prior-year period.
The company's profit attributable to owners of the company was 3.13 billion yuan, or 0.128 yuan per share, compared to a loss of 7.01 billion yuan, or a 0.718 yuan per share loss, in the first quarter of 2018.
The S&P Global Market Intelligence earnings per share consensus for the first quarter of 2019 was 0.08 yuan on a GAAP basis.
As of May 17, US$1 was equivalent to 6.92 Chinese yuan.