Smartphone

Xiaomi Smartphone Shipments Narrow Gap With Apple, Samsung

Xiaomi Corp.’s quarterly profit beat estimates after the world’s third-largest smartphone maker narrowed the gap with market leaders Samsung Electronics Co. and Apple Inc. in shipments.

The Beijing-based company posted an adjusted net income of 6.1 billion yuan ($949 million) in the quarter ended in March, surpassing the highest estimate of 5.3 billion yuan compiled by Bloomberg. Higher finance income and tax refunds contributed to the profit beat. Revenue jumped 55% to 76.9 billion yuan, also ahead of analyst estimates compiled by Bloomberg, according to a filing to the Hong Kong Stock Exchange Wednesday.

Billionaire co-founder Lei Jun is seeking new battlegrounds for the 11-year-old company that has already expanded from smartphones to a wide spectrum of consumer electronics, including smart TVs and laptops. The entrepreneur in March unveiled a $10 billion foray into carmaking, embarking on its biggest-ever overhaul.

“We managed to realize a very fast growth for in smartphone business with an increased gross profit,” President Wang Xiang said on a conference call. “That was helped by our strategy of realizing more higher-end products.”

On Wednesday, a U.S. court issued a final order that formally removes sanctions that could have blocked American investment in Xiaomi. The company had been accused of alleged links to China’s military in the waning days of the Trump administration, though it disputed that charge and sued the U.S. government. The Defense Department has agreed that a final order vacating the designation “would be appropriate,” according to a May legal filing.

The court order marks a rare victory for China’s technology giants caught in the crosshairs of the U.S. government, which had under former President Donald Trump targeted scores of Chinese tech companies over national security concerns. Huawei Technologies Co., once among Xiaomi’s biggest rivals in smartphones, was cut off from its key suppliers as a result of a series of restrictions imposed by the U.S.

The lifting of the U.S. blacklisting means Xiaomi can now focus on growing its businesses, including in smartphones — responsible for roughly 60% of company’s revenue — as well as nascent endeavors like smart cars. The company had shipped 48.6 million handsets worldwide in the first three months of the year, a 64.8% increase from a year ago and the fastest growth among the top five vendors, according to research firm International Data Corp.

Xiaomi grew its share of the premium market in China, which allowed the company to boost its average selling prices, the company said Wednesday. Despite potential competition from Honor, the smartphone brand spun off from Huawei, Xiaomi intends to stick with its existing strategy and expand offline channels to keep its sales momentum going, Wang said. But the company faces “tremendous challenges” in India — where it holds a 28% share of the smartphone market — because of the deadly coronavirus wave in the South Asian nation, he added.

Xiaomi remains among “the biggest beneficiaries from Huawei’s smartphone retrenchment,” Bloomberg Intelligence analyst Matthew Kanterman wrote in a research note ahead of the earnings release.