The upbeat earnings come despite doubts over the company’s long-term business model. Xiaomi is trying to position itself as an internet company, asserting that it’s more than just a hardware maker because of the services it offers with its devices, such as music and video streaming apps.
But internet services revenue grew at a slower pace than overall revenue in the quarter, and at 4 billion yuan ($584 million) accounted for about 9% of the total. Apple (AAPL), by comparison, reported $9.55 billion in software and services revenue last quarter, about 20% of its total revenue.
It now rivals Samsung (SSNLF) as the number one smartphone seller in India. Sales are healthy elsewhere in Asia, and it’s competing strongly in European countries like Spain and Greece. But luring customers into using internet services outside China has been a challenge.
“We don’t see many people getting a Xiaomi phone because they want to use Xiaomi’s internet services,” said Kiranjeet Kaur, an analyst with research firm IDC. “Outside of China, there are a lot of options.”
The struggle underlines analysts’ concerns that Xiaomi can successfully diversify away from smartphones, which is a very low margin business for the company. Although Xiaomi sells a lot of phones in places like India and Southeast Asia, most of them are cheap models that cost under $100.
Xiaomi also announced last year that it would cap smartphone profit margins at 5%.
Xiaomi launches new phones, wearables in Taiwan.
Chinese smartphone brand Xiaomi Corp and its fitness-focused wearables maker Huami Corp unveiled a range of new products for the Taiwan market.
The offerings include Xiaomi’s (NT$865) fitness tracker Mi Band 3, the (NT$7,999) midrange Android smartphone Mi Max 3, as well as Huami’s (NT$1,999) Amazefit Bip and the advanced (NT$4,995) Amazefit Smartwatch 2.
“We aim to establish a strong presence at all price points and cater to the needs of all consumers, ranging from those who are new to wearables to athletes seeking performance gains by analyzing and tracking their cardiorespiratory fitness via VO2 max readings,” Huami chairman and chief executive officer Wang Huang told a news conference.
Following the launch of the first Mi Band, the fitness tracker has become a bigger part of users’ everyday lives, with the device helping consumers make mobile payments and unlock doors in China, Huang said. However, the company is still working with local partners to enable near-field communication (NFC) applications for the Taiwanese market, such as paying MRT fares, he said.
Another major leap for wearables is expected in the next three years as the company continues to develop medical-grade applications, including tracking blood pressure, blood sugar and blood oxygen levels, Huang said, adding that a pilot program between Huami, health technology developer Pai Health and insurance companies has yielded promising results.
The escalating US-China trade war would not affect Huami’s business, Huang said, adding: “Our cost control capability is unrivaled.”
Since the launch of the first generation Mi Band in Taiwan three years and seven months ago, more than 1.66 million units have been sold in Taiwan, Xiaomi Taiwan general manager Henman Lee said.Considering the popularity of the wearable, the company has stocked about 100,000 units, Lee said.
The Taiwanese fitness tracker market is estimated at about 30,000 units a month, he said.