When talking about the future of mobility, many words come to mind including autonomous driving and (more…)
Dear valued investors and friends,
It is my great honor to report another set of stellar results in what was an exceptional year for us.
We have released our annual results for the year ending on December 31, 2020. Aside from reporting achieved during the year, I believe it is equally important for us to share our plans and prospects for the new decade.
A key component of our success is our resolute belief in providing value to the user
In 2020, Xiaomi posted a solid performance amid the pandemic and global economic headwinds, with revenue and adjusted net profit growing 19.4% and 12.8% year-over-year to RMB245.9 and RMB13 billion respectively. We have also achieved all-time-high figures across all performance metrics, outpacing our global peers in terms of shipments growth and maintaining a leading position in mainland China’s smart TV market.
We owe such growth to the support and recognition from our valued users. The year 2020 marks the tenth year of our development. The successes of our entrepreneurial experience over the past ten years are built on our respect for our users and putting our users’ interests ahead.
Our successes have also been proven by our commitment to relentlessly build amazing products with honest prices. In order to achieve this, we had earlier promised to both existing and potential users that our net profit margin for our hardware business will not exceed 5% per year.
Just like in the past two years, I am proud to report that we have delivered on our promise and our net margin for our hardware business remained under 1% in 2020. Our dedication in treating our users fairly continues to strengthen.
While we continue to improve the competitiveness of our products and services, we have articulated a series of long-term well-crafted plans since last year to build a better community and facilitate improved communication with our users. This move will not only contribute to creating a closed ecosystem of users and internet traffic boosting our business model but it will also guide the evolution of our products and services. This shall be a priority and provide the foundation for our development in the next decade.
A solid foundation for Xiaomi’s development in the next decade
Thanks to a solid foundation, we have great confidence and a clear strategy to help us create a bright new decade.
Since 2016, we have stepped up our efforts in strengthening our foundation and have made significant improvements to our product capabilities while establishing a firm foothold in the premium market. In the meantime, we have initiated thorough management of our brand system and have been listed in BrandZ Top 100 Most Valuable Global Brands for two consecutive years, marking our remarkable success in dual-brand strategy for our smartphone business.
Our 7-year long exploration of overseas markets since 2014 has successfully brought our footprint to more than 100 countries and regions around the world, establishing a leading position and laying a solid foundation for growth in many key local markets, with our smartphone business ranking top three globally. In 2020, half of our revenue came from overseas markets, transforming Xiaomi into a truly global company.
Our new market-proven model in the “new retail” sector that combines online and offline businesses has been tried and tested since 2016, paving the way for a breakthrough in the offline channel. In 2021, we will expand Mi Homes to all counties in China. In addition, we have also made a breakthrough in Europe, opening new pathways for us to gain further market share globally.
We have taken over three years of development and restructuring since our IPO in 2018 to establish a robust corporate governance mechanism and a capable and dynamic management team. During this period, in addition to introducing a number of young and experienced executives from other organizations, we have also promoted young group executives and general managers internally. Such a dynamic team will provide strong, visionary leadership for our development over the next decade.
After more than four years of planning and validation since 2017, we established our core strategy of “Smartphone × AIoT” for the next new decade in August last year. Under the guidance of this strategy, smartphones will remain as the cornerstone of our business while our AIoT platform will center around smartphones to build up a smart living ecosystem and enlarge our user base. With the further integration of smart connectivity, our core strategy of “Smartphone × AIoT” will further add to the multiplier effect and help us access more application scenarios, acquire more users and deepen the economic moats of our business, allowing everyone in the world to truly enjoy a better life through innovative technology and also make Xiaomi a true leader among future lifestyle trendsetters.
Meanwhile, we will adhere to our “three guiding principles” for our business: “never cease to explore and innovate”, “continue to offer products with the best price-to-performance ratio”, and “always make the coolest products.”
Over the past three years, we have made significant progress in key technologies such as imaging, wired/wireless charging technology, AI and IoT platforms, establishing our leading position in the global industry. This is attributable to a strong and sustained investment in technology research and development. In 2020, our research and development expenses were approximately RMB10 billion and are expected to increase by more than 30% to over RMB13 billion this year. We will further expand our research and development team with over 5,000 engineers to be recruited this year.
Despite many unexpected difficulties, Xiaomi has reached new heights due to its continuous exploration and development over the past few years with its general management capabilities significantly enhanced. Xiaomi is striding into the future with high morale.
Embracing global uncertainties with continuous evolution
Over the past year, we have witnessed great uncertainty in the world. And in the years to come, such uncertainty is expected to be the new normal.
Such uncertainties present us not only with challenges but also present us with opportunities, such as the growth of the contactless economy and the huge boost it promises to bring to devices and communication services. The rebound in demand during the pandemic and the excellent performance of Xiaomi, both in mainland China and in overseas markets, as well as the support of our upstream and downstream partners, users and Mi Fans, have reinforced our confidence in future growth.
In 2021, we will continue to implement our core strategy of “Smartphone × AIoT” focusing on the smartphone market to seek greater breakthroughs while systematically developing “smart home” solutions and provide users with a more complete, convenient and thoughtful living experience. At the same time, we have a series of ambitious plans for the long-term to drive Xiaomi’s continuous evolution. In the coming days, you will witness the great changes they will bring.
As the saying goes, “Good timber does not grow with ease: The stronger the wind, the stronger the trees”. The more uncertain the times are, the more we will need to overcome unpredictable challenges. It takes greater courage to persist in our dreams, to keep pace with the times and stand by our users. To excel during such challenging times, a company should endeavor to adjust on a continuous basis, actively adapt its approach, be prepared to recalibrate and never cease to achieve advancements.
We may not be able to change the uncertainty of the world in the short-term but we can make the best of the situation by improving ourselves and influencing one another to embrace such uncertainties for a better future. The many who are constantly making advancements and improving themselves, including Xiaomi, will eventually change the world we live in and bestow upon us unending hope.
Thank you for believing in us, investing in us, and joining us in our journey to let billions of people around the world enjoy better life through innovative technology. I look forward to exploring and moving forward with you into the future.
March 24, 2021