Xiaomi’s business hit hard by China’s Covid-19 lockdowns as profit halves in first quarter
- Xiaomi said its first-quarter revenue fell 4.6 per cent from the same period a year earlier to 73.4 billion yuan
- ‘This pandemic in China had a very big impact on our production and logistics,’ said Xiaomi’s president
Chinese smartphone maker Xiaomi turned in weak sales and profit for the first quarter as China’s strict Covid-19 lockdowns dampened demand and disrupted supply chains across the country.
“This pandemic in China had a very big impact on our production and logistics,” said Wang Xiang, Xiaomi’s president, during an earnings call with reporters on Thursday. “Many of our stores in Shanghai are still closed.”
Wang also said the pandemic had dampened consumer confidence, contributing to weak sales.
Xiaomi said its first-quarter revenue fell 4.6 per cent from the same period a year earlier to 73.4 billion yuan (US$10.9 billion). The Beijing-based company said its adjusted net profit fell 53 per cent year-on-year to 2.85 billion yuan in the first quarter.
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Xiaomi shipped 38.5 million smartphone units globally in the March quarter, down 10.5 per cent year-over-year. Its smartphone revenue came in at 45.8 billion yuan, down 11 per cent year-on-year.
“The shortage in low-end chips in the first quarter was still very serious,” Wang said.
Mainland China’s smartphone market stumbled in the first quarter, with total shipments from the top five vendors – Apple, Xiaomi, Oppo, Vivo and Honor – down 18 per cent year on year to 75.6 million units, according to research company Canalys.
Semiconductor Manufacturing International Corp (SMIC), China’s top foundry, said earlier this month that chip demand from downstream sectors such as smartphones, consumer products and personal computers had “dropped like a stone”.
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“The outbreak of the Omicron Covid-19 variant and strict lockdowns in major cities from February cast a shadow over the consumer market,” said Canalys analyst Toby Zhu in a note, adding that the more cautious approach of vendors to stock allocation in response to sudden retail closures and logistics delays would inevitably affect sales in the short term.
The weakness in China’s broader economy has also weighed on the results of other Chinese tech giants. Both Tencent Holdings and JD.com posted sluggish quarterly revenue growth earlier this week, largely due to weaker consumer demand.
China’s retail sales dropped 11.1 per cent year-on-year in April and the barometer – which gauges broad-based consumer demand for clothes, food and drinks, cosmetics and so on – was down 0.2 per cent year-on-year in the first four months, Chinese official figures showed.
JD.com chief executive Xu Lei, who took over the top job from Richard Liu last month, said earlier this week that the current wave of Covid-19 was a “double killer” for both online and offline businesses.
