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(Bloomberg) -- Xiaomi Corp. recorded its slowest pace of quarterly sales growth since early 2020 after supply chain mayhem choked off the flow of vital components and rivals like Apple Inc. eroded its market share.
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Shares in China’s largest smartphone maker slid more than 5% in Hong Kong to their lowest since September 2020, reflecting lingering concern about a global chip shortage that’s wiped billions of revenue from the automotive and electronics industries. Xiaomi foresees that deficit persisting well into 2022 before easing especially around the second half of the year. Still, it’s expecting ship roughly 190 million smartphones in 2021 -- a rise of about 29% from last year -- thanks to inroads into overseas markets and an expanding retail network.
Supply Chain May Hamper Xiaomi As Demand Recovers: Street Wrap
Revenue climbed just 8% to 78 billion yuan ($12.2 billion) in the September quarter, in line with analysts’ projections but marking its slowest growth since the June quarter of 2020. Net income plummeted 84% to 788.6 million yuan after the company took a 3.5 billion yuan hit from losses in investments, echoing major writedowns that its tech peers have reported in a quarter hurt by China’s decelerating economy and market ructions.
“We faced fairly big pressure in third quarter” from chip shortages, President Wang Xiang told reporters after the results. “This will continue in the fourth quarter, but will start to ease in 2022.”
What Bloomberg Intelligence Says
Protracted chip shortages and logistics challenges may continue to hamper Xiaomi’s overseas smartphone sales in 4Q. Economic headwinds in China and intensifying competition with peers could inhibit the company’s sales in the domestic market. Smartphone gross margin may fall in 4Q as Xiaomi releases entry-level products targeting the mass market and offered steep discounts for its premium smartphones during Singles’ Day sales. Yet rising monthly active users (MAU) and premium smartphone shipments may bode well for Xiaomi’s Internet services, which could maintain a gross margin of 70%.
- Nathan Naidu and Matthew Kanterman, analysts
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Read more: These Choke Points Are Keeping the Global Supply Chain Stuck
Xiaomi has lost more than a third of its value this year as supply chain issues and a resurgence of the Covid pandemic in key markets hindered operations. It briefly surpassed Apple to become the world’s No. 2 smartphone vendor before global shipments slumped in the third quarter, primarily due to component shortages. The Chinese vendor registered a 4.6% decline in smartphone shipments after high double-digit growth over the previous four quarters as supply issues started to bite, according to research firm International Data Corp. That compared to a 21% surge in shipments from Apple following the release of new iPhones.