It's time to get to know Lei Jun again

Marudo Mountain

Marudo Mountain

Tiger Sniff Official Team

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Produced by Tiger Sniff Technology Group

Author | Marutoshan

Editor | Miao Zhengqing

Headline | Visual China

Article Summary

In 2024, Xiaomi Group's revenue was 365.9 billion yuan and net profit was 27.2 billion yuan, both reaching historical highs. The shipment of smartphones reached 169 million units, the only positive growth among the top three in the world; The automotive business delivered 136800 units, narrowing the losses; The IoT business has exceeded 100 billion yuan, and the growth rate of large appliances is significant. Lei Jun has strong strategic determination, continuous increase in research and development investment, and AI layout has become a key challenge for the future.

•    SU7 delivered better than expected, with losses narrowing quarter by quarter, and may be profitable in the second half of the year.

•    High end mobile breakthrough: ASP hits a historic high, and Xiaomi 15 Ultra sales increase by over 50% year-on-year.

•    The explosive growth of IoT has led to record high shipments of air conditioners, refrigerators, and washing machines, with major appliances contributing high gross margins.

•    Financial performance is in full swing, with both revenue and profit increasing, and the stock price rising 347% in a year, restructuring the valuation logic.

•    Wuhan's intelligent factory will be put into operation, promoting the "human car home" ecological loop and cost reduction.

•    The potential of AI is waiting to be released. With increased research and development investment, AIoT devices have exceeded 900 million, and system level AI solutions may become the winner.

Mr. Lei, please, let's make sanitary pads

After exposing the chaos in the sanitary napkin industry at the 3.15 evening party, Lei Jun's personal Weibo became a wishing pool again, following badminton and Polaroid.

It seems that as long as there is a problem in an industry, Lei Jun is the cure for everything.

But two years ago, such a painting style would have been unimaginable. At that time, Lei Jun's responsibilities on Weibo were equivalent to those of Xiaomi customer service, and most of the comments were filled with: "Quickly call Jin Fan (Vice President of Xiaomi Group's Mobile Department), the system has been updated and there is a bug again.

Why did Xiaomi and Lei Jun's personal IPs undergo such a significant reversal in two years?

Making cars is definitely an important factor, after all, the 529900 yuan SU7 Ultra has truly changed the rules of the automotive industry.

But the author believes that the key reason for Xiaomi's comeback is that in this massive car making movement, its traditional business has achieved "no loss of position".

This "comprehensive approach" not only maintains consumer confidence, but also unleashes a very obvious "multiplier effect" in Xiaomi's "human car home ecosystem" strategy.

This was fully reflected in yesterday's financial report.

On the evening of March 18th, Xiaomi Group released its 2024 annual and Q4 financial reports. According to the financial report, Xiaomi Group's total revenue in 2024 reached RMB 365.9 billion, a year-on-year increase of 35%; After adjustment, the net profit reached 27.2 billion yuan, a year-on-year increase of 41.3%, and both core financial indicators hit historical highs.

Image source: Xiaomi financial report

Differentiated into various businesses, extract several key data for reference:

The global shipment volume of smartphones reached 169 million units, a year-on-year increase of 15.7%. Among the top three global smartphone shipments in 2024, Xiaomi is the only brand with positive growth.

The total revenue of the intelligent automobile business reached 32.8 billion yuan, and the total delivery volume for the year reached 136800 units, exceeding the previously set target of 100000 units.

The IoT and consumer goods business has surpassed a scale of 100 billion yuan for the first time, reaching 104.1 billion yuan, a year-on-year increase of 30%. The shipment volume of air conditioners, refrigerators, and washing machines has all reached a historical high.

It is worth mentioning that before the release of this financial report, Xiaomi's stock price closed at 57.65 yuan on that day, an increase of about 347% compared to last year's annual report release date (March 19, 2024).

At present, Xiaomi's valuation logic may really need to be restructured.

Multiple flowering points

For the 2024 annual report, many people are concerned about whether Xiaomi Auto has made money for Lei Jun?

At least at this stage, the answer is no. According to the financial report, in 2024, the adjusted net loss of innovative businesses such as smart electric vehicles was RMB 6.2 billion. Based on the annual delivery volume of 136854 units, Xiaomi lost approximately RMB 45300 per SU7 last year.

However, considering that as the first generation model, Xiaomi SU7 needs to bear high technical research expenses, and Xiaomi Auto's self built factory needs to include depreciation and amortization of factory equipment in cost accounting, this loss is completely within an acceptable range.

In the smart car business, there are two details worth noting:

Firstly, Xiaomi's losses are narrowing. Looking at each quarter, its losses have decreased from 1.8 billion yuan in the second quarter to 700 million yuan in the fourth quarter, and its gross profit margin has also increased from 14.7% to 20.4% during the period. In my opinion, in an ideal situation, Xiaomi's intelligent car business can achieve profitability in the second half of this year.

Secondly, despite a quarterly loss of 700 million yuan in the automotive business, Xiaomi Group's net profit in the fourth quarter reached 8.316 billion yuan, a year-on-year increase of 69.4%, far higher than the previously estimated 5.22 billion yuan.

At a stage where the smart car business is bound to incur losses, Xiaomi's traditional business has built a strong moat for the former. According to the financial report, the revenue of Xiaomi Group's "Mobile x AIoT" division in the fourth quarter of 2024 was RMB 92.3 billion, a year-on-year increase of 26.1%.

Looking at it separately, the mobile phone business revenue during the period was 51.3 billion yuan, a year-on-year increase of 16%, and the gross profit margin increased by 0.3 percentage points to 12% compared to the previous period. Compared to other businesses, it can be seen that the gross profit margin performance of smartphones is still under pressure. However, during the conference call after the release of the third quarter financial report, Lu Weibing stated that the gross profit margin of 11.7% in the third quarter has bottomed out. As upstream component prices gradually stabilize, Xiaomi's mobile phone business is expected to gradually reverse in terms of gross profit margin in the future.

It is worth mentioning that this year Xiaomi's layout around "high-end" smartphones has been realized. According to the financial report, in 2024, the average selling price (ASP) of Xiaomi smartphones was 1138.2 yuan, a year-on-year increase of 5.2%.

In the fourth quarter of the release of Xiaomi 15 series, the ASP of smartphones reached 1202.4 yuan, setting a record high in Xiaomi's history.

With the release of Xiaomi 15 Ultra, this number may further increase in the first quarter of this year. According to information released by Xiaomi, on March 3rd, the day the Xiaomi 15 Ultra officially went on sale in the Chinese market, sales increased by over 50% compared to the same period last year. In overseas pre-sales, sales increased by over 100% compared to the same period last year.

In terms of IoT and consumer goods business, the performance of Dahua Electronics is also surprising. According to the financial report, Xiaomi's air conditioning product shipments exceeded 6.8 million units in 2024, with a year-on-year growth rate of over 50%; The shipment volume of refrigerator products exceeded 2.7 million units, with a year-on-year growth rate of over 30%; The shipment of washing machine products exceeded 1.9 million units, with a year-on-year growth rate of over 45%.

These products with relatively low attention contributed more gross profit than smartphones in the fourth quarter, accounting for 22.5% of total revenue.

In addition, during the conference call after the release of the financial report, Lu Weibing mentioned that Xiaomi will enter the "first year of going global" in 2025, and it will take 5 years to open 10000 Xiaomi homes, hoping to double Xiaomi's international revenue in 3 to 4 years.

Human clarity "

In various public occasions, Lei Jun never avoids discussing the business philosophy of "following the trend". Of course, for the general public, a more straightforward statement may be 'chasing trends'.

But different from the general Internet giants, Lei Jun and the senior management team showed a strong strategic determination when they were at the forefront, especially in 2024, when their own business was full of positive news.

For example, Xiaomi's judgment on "increasing by 1 point per year".

During the conference call after the release of the financial report, Lu Weibing mentioned that in 2024, the market share gap between smartphone (China) brands is not significant, ranging from 14% to 18%, and there is no particularly large gap between them.

This is not a normal and mature number. In theory, the top three in the industry will occupy more than 70% of the entire market share. Currently, the entire smartphone market pattern is unstable, and it is expected that 2025 will be the year when mobile phone brands will move towards differentiation, "said Lu Weibing.

Looking back at the history of the smartphone industry, it is indeed the norm for the "three strong players to capture 70% of the market", such as in the most turbulent years of 2019 and 2020. At that time, it was a period of transition from 4G to 5G, and the competition among various manufacturers was both winning and losing, but they also maintained the "Three Seven Rules" situation.

Xiaomi's goal, based on changes in the market landscape, is to increase its market share by one point per year.

It should be noted that starting from the fourth quarter of 2023, Xiaomi's smartphone shipments have been increasing for five consecutive quarters. Despite this momentum, Xiaomi still chooses to take steady steps.

In the automotive business, Xiaomi's layout is relatively restrained. The financial report shows that Xiaomi Group's R&D expenditure reached 24.1 billion yuan in 2024, a year-on-year increase of 25.9%, and the R&D investment is expected to reach 30 billion yuan in 2025.

Since the announcement of car manufacturing in 2021, Xiaomi's research and development expenses have been increasing year by year at a rate of around 25%, which has kept operating expenses within a reasonable range.

However, in terms of overall capital expenditure, Xiaomi also adheres to the principle of "where the province is, where the flowers are".

Perhaps they have tasted the sweetness of self operated factories in smart cars and mobile phones, and Xiaomi's smart home appliance factory is also under construction intensively. It is reported that the factory located in Wuhan New City will be delivered in the second half of this year, and the first phase of the project will focus on the air conditioning category.

Note: The blogger is the General Manager of the Big Data Department of Xiaomi Group

If nothing unexpected happens, Xiaomi will also have its smart factory undertake the production of household appliances such as refrigerators, washing machines, and televisions. This means that Xiaomi's "human car home full ecological strategy" is about to complete the ecological loop from downstream to upstream.

Not to mention that self operated factories in various categories can provide deep adaptation of underlying hardware for "people, cars, and homes", the advantage of large-scale cost reduction alone is enough to give competitors in the industry a headache.

After all, in the era of relying on contract factories for production, Xiaomi only relied on supply chain integration to discourage a group of "friendly merchants".

Where is Xiaomi's turning point?

If we could summarize Lei Jun's mood in one sentence after 2024, it would probably be 'I don't even know how to lose'.

Since the second quarter of last year, the title of "Xiaomi's strongest financial report in history" has been refreshed quarter by quarter, and the intelligent car business has been on the rise. Various traditional businesses have steadily developed, and the strategic layout of "human car home full ecosystem" has gradually taken shape.

Based on this inference, the future Xiaomi Group will be in a long-term upward phase.

In this context, is there a turning point in Xiaomi's growth curve? Or, do Xiaomi still have hidden concerns at present?

At present, Xiaomi is not enough to 'lie flat'. One immediate challenge is that AI capabilities have not yet been fully realized.

Compared to OPPO vivo、 Honor and other manufacturers have coincidentally raised their AI strategies to the "highest priority" this year, while Xiaomi has been somewhat passive in this regard. The official version of Pengpai OS 2.0, which can support system level function scheduling, was only launched at the end of last year.

But in fact, Xiaomi is one of the earliest manufacturers in China to promote the concept of AIoT, and also one of the first mobile phone manufacturers to participate in the development of large models. Its technological reserves in AI are definitely not weak. As early as August 2023, Xiaomi AI Lab had already run models with 1.3 billion and 6 billion parameters respectively, and completed the upgrade iteration of MiLM2 in November last year.

At present, whether on smartphones or IoT products, Xiaomi's AI capabilities are mostly demonstrated in functional applications in high-frequency scenarios, and there are still significant shortcomings in AI based ecological linkage.

Of course, other manufacturers in the industry also commonly face this issue.

However, Xiaomi's uniqueness lies in its "smartphone x AIoT" basic drive, which is almost the strongest among consumer electronics manufacturers, or even none at all. This basic platform is reflected on one hand in the comprehensive coverage of household products, and on the other hand in its strong user base.

According to the financial report, as of December 31, 2024, the number of IoT devices connected to Xiaomi's AIoT platform (excluding smartphones, tablets, and laptops) has reached 904 million; There are 18.3 million devices connected to the AIoT platform with 5 or more devices, a year-on-year increase of 26.1%.

At this scale, if Xiaomi can come up with a truly system level AI solution that spans across "people, cars, and homes", it will be a blow to its competitors in terms of dimensionality reduction.

An exciting news is that during the conference call after the release of the financial report, Lu Weibing stated that at least a quarter of Xiaomi's 30 billion yuan R&D expenses this year will be invested in the AI field.

Whether Xiaomi's high growth has a turning point may depend on whether Xiaomi can bring more "certainty" to AI beyond its "growth potential".

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