Today, Xiaomi Group announced its 2018 annual financial report. During the reporting period, it achieved total revenue of RMB 174.9 billion ($26.06 billion), a year-on-year increase of 52.6%. The adjusted profit was RMB 8.6 billion ($1.28 billion), a year-on-year increase of 59.5%. Total revenue was in line with expectations and net profit exceeded market expectations.
During the reporting period, Xiaomi’s smartphone revenue was RMB 113.8 billion ($16.95 billion), a year-on-year increase of 41.3%. According to IDC statistics, global smartphone shipments fell 4.1% year-on-year. But during the reporting period, Xiaomi’s smartphone shipments reached 119 million units, a year-on-year increase of 29.8%.
Lei Jun said that for the smartphone business, in the fourth quarter of 2018, Xiaomi successfully completed the brand grooming, as well as the active adjustment of product structure and release rhythm. The revenue of 2,000 yuan and above models accounted for 31.8% of total smartphone revenue. Thanks to this, the average selling price (ASP) of smartphones in mainland China increased by 17% year-on-year. At the same time, due to the growing shipments of smartphones in developed markets in Western Europe, the corresponding ASP grew by 9.7%.
Also, Lei Jun issued a promise to consumers that Xiaomi’s hardware comprehensive net profit margin will never exceed 5%. According to the financial report, the net profit after-tax of Xiaomi Hardware in 2018 is positive and less than 1% (including smart hardware including smartphones, IoT and consumer goods). In a letter to investors and Xiaomi users, Lei Jun said that this data eloquently proves that user interests and corporate income can exist in harmony without any opposition.
In 2018, both Xiaomi’s average smartphone price and profit increased. So Xiaomi can still adhere to the principle of close to cost pricing.