Stage Freight

Image source: Avigator Fortuner, alexasokol83 - Shutterstock

What's going on?

Chinese electronics giant Xiaomi reported its first quarterly drop in revenue on record on Thursday.

What does this mean?

The entire smartphone industry is already being pummeled by a lethal mix of shortages, European war, and dwindling consumer confidence. But Chinas smartphone makers have had another challenge to contend with in the form of Covid lockdowns, which have reduced both production and demand to rubble. That led Xiaomi to ship 18% fewer smartphones last quarter than the same time in 2021, and its sales to fall around 5%. Not ideal, given that its now lost even more ground to market leaders Samsung and Apple. And even if lockdowns do ease up, analysts think higher costs could leave the company struggling to get profitability anywhere near last years lofty heights. Investors said thanks, but no thanks: they sent its stock down 5%

Why should I care?

The bigger picture: Xiaomi needs a breath of fresh air.
Xiaomis smartphone business makes up around 60% of its total sales, so it follows that this slowdown has it looking to other segments to pick up the slack. Its been putting more emphasis on smart TVs, tablets, and laptops, which have long been staples on its shelves. But its also trying to boost sales of its digitally connected devices: think doorbells and obnoxiously expensive air conditioners.

Zooming out: Does Xiaomi dream of electric vehicles?
Xiaomi has irons in the EV fire too: the company committed last year to investing $10 billion in the space, and announced plans to launch its first vehicle by 2024. If that happens, Xiaomi will be going head to head with established carmakers like Hyundai. Thats no mean feat: the carmaker said this week that itll be spending nearly $17 billion to boost production in South Korea, taking it from 350,000 EVs a year to 1.4 million by 2030 (tweet this).

Originally posted as part of the Finimize daily email.

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