But the company suffered some difficulties in the fourth quarter. Although revenue and net profit increased year-on-year in the quarter, there was also a downward trend. Smartphone shipments also declined year-on-year and ring-on-year in the quarter, which Millet explained as a result of the active adjustment of the business structure of smartphones.
Mobile phone business restructuring fluctuated in the fourth quarter
In 2018, millet smartphone revenue was 113.8 billion yuan, an increase of 41.3% over the same period last year. During the reporting period, the shipment of millet smartphones reached 119 million units, an increase of 29.8% over the same period last year.
In addition, the average price of millet mobile phone (ASP) increased from 881.3 yuan in 2017 to 958.1 yuan in 2018, the average price of mobile phone in mainland China increased by 17% compared with the same period last year, and the average price of smartphone in overseas market increased by 9.7% compared with the same period last year.
From a global perspective, the performance of millet smartphone business in 2018 is also bright enough. According to data released by IDC, global smartphone shipments fell by 4.1% in 2018 from a year earlier. For the top five manufacturers, millet and rice aloneHUAWEIDouble-digit year-on-year growth was achieved, OPPO only increased slightly, while Apple and Samsung both showed year-on-year declines.
But Mimi's smartphone business is not a bed of roses.
As far as the fourth quarter of 2018 is concerned, millet's smartphone business revenue and shipments are declining annually. Among them, quarterly shipments even hit a six-quarter low, with only 25 million units.
According to the data of China smartphone market published by IDC in 2018, the sales of millet in China in the fourth quarter and the whole year showed a year-on-year decline.
Millet CFO Weekly Capital said in a media conference call that the main reason is that millet made adjustments to the mobile phone product mix in the quarter, focusing on the high-end market. In the fourth quarter of 2018, millet released only two products, one was MIX3 released in October, and the other was Play released only in December. Zhou Shengzi believes that millet MIX3 is a high-end product, and the shipment volume will not be particularly large, while millet Play did not show up in the quarter due to its late release.
In an interview at the Millet 9 conference, Lei Jun also disclosed a key message. He said that in the fourth quarter of 2018, the sales of millet products had already accounted for the vast majority in China, not in China.Red rice。
After the adjustment in the fourth quarter of 2018, millet will separate the red rice brand in 2019. According to the data released by millet, the first product released by the red rice brand after its independenceRedmiNote7 has shipped more than 1 million units in less than a month, and Zhou said he expects shipments to reach 4 million units by the end of March. The millet 9 series, released in February, could also reach 1.5 million units by the end of March.
In addition, the offline channel of millet also made rapid progress in 2018. As of December 31, 2018, there are 586 millet homes in mainland China, mainly distributed in first, second and third-tier cities. In order to further penetrate into small and medium-sized cities and rural areas in China, millet has accelerated the expansion of authorized stores network. As of December 31, 2018, 1378 authorized stores were established, compared with 62 a year ago.
With the improvement of millet offline channel, as well as the adjustment of mobile phone brand and product structure, it is worth looking forward to whether millet mobile phone business can make new breakthroughs in China and the global market in 2019.
IoT Business as a Bright Spot to Seek Expansion Advantage
In 2018, the revenue of Millet IoT and Consumer Products Branch was 43.8 billion yuan, an increase of 86.9% over last year. It also became the fastest growing business of Millet in 2018.
In terms of the proportion of the business in total revenue, it reached 25.1% in 2018 and 20.5% in 2017, and even 33.6% in the fourth quarter of 2018, compared with 24.2% in the same period of 2017. IoT business undoubtedly became the highlight of the fourth quarter of 2018 and the whole year.
According to the data released in the financial report, as of December 31, 2018, the number of IoT devices (excluding smartphones and laptops) connected to the millet IoT platform was about 151 million, an increase of 193.2% over the same period last year. The number of users with more than five millet IoT devices (excluding smartphones and laptops) is about 2.3 million, an increase of 109.1% over the same period last year.
In addition, the cumulative shipment of Xiaoai speakers exceeded 9 million units, and the global shipment of millet TV was 8.4 million, an increase of 225.5% over the same period last year. During the reporting period, millet also began to enter the field of white power. In July and December 2018, millet air conditioner and Internet washing and drying machine were launched respectively.
In 2018, millet began to expand its IoT business overseas. In February 2018, smart TV entered the Indian market and ranked fourth in the fourth quarter of 2018.
IoT business has also become the target of many mobile phone manufacturers. In 2018, OPPO and vivo jointly established the IoT Open Ecology Alliance with several household appliances enterprises. Huawei announced its strategy of upgrading IoT at the AWE recently. Yu Chengdong also set a target of winning one third of China's IoT equipment in three years.
Millet is also increasing its IoT business.
In order to meet the rise of IoT business, millet has made many major adjustments in its organizational structure. Not long ago, Cui Baoqiu was appointed Vice President of the Group and Chairman of the Technical Committee of the Group, and a new Ministry of Artificial Intelligence, Cloud Platform and Big Data was established. The AIoT Strategic Committee was announced to promote the collaboration of relevant business and technical departments of AIoT and promote the implementation of the strategy.
Recently, after independence, Red Rice has also announced its entry into the field of IoT, launching its first large electrical products: Redmi fully automatic wave wheel washing 1A. From the current information, red rice will also build its own ecological chain model compared with millet, which will undoubtedly further enrich the overall IoT ecology of millet.
Internet revenue declined in the fourth quarter but diversified
In 2018, the revenue of Millet Internet Service Branch increased 61.2% to 16 billion yuan. Among them, advertising revenue amounted to 10.1 billion yuan, an increase of 79.9% over the previous year; Internet value-added services revenue amounted to 5.9 billion yuan, an increase of 36.7% over the previous year, of which game revenue amounted to 2.7 billion yuan, an increase of 7.3% over the previous year. Income from other Internet value-added services reached 3.2 billion yuan, an increase of 79.9% over the same period last year.
In the fourth quarter, the size and proportion of millet's Internet service revenue declined annually. Internet revenue accounted for 9.1% in the quarter, up from 8.3% in the same period last year, but it was 9.3% in the third quarter of 2018. From the quarter-to-quarter comparison of this year, this proportion also recurs frequently, with 9.4% in the first quarter of 2018 and 8.8% in the second quarter. At the same time, the overall proportion of Internet service revenue is still at a low level.
In the third quarter of the conference call, Millet CFO Weekly funded once explained that the size of millet Internet service revenue has been considerable, while achieving high-speed growth year-on-year, while other businesses are also growing rapidly, so millet is not concerned about the proportion, but whether the revenue growth.
This time, Zhou Shenzhen said that the Internet business in the quarter also had good news, that the business has made a very important breakthrough in diversification. In 2018, Millet's Internet revenue from mobile advertising and games in China accounted for more than 30% of Internet revenue.
In the fourth quarter of 2018, the contribution of TV and Internet revenue to Internet revenue has reached 8.3%, up 119.1% year on year; overseas Internet revenue accounts for 6.3% of Internet revenue, up 1295.6% year on year; Commodity E-commerce accounts for 4.1% of Internet revenue, up 427.6% year on year; millet finance accounts for 11.9% of Internet revenue, up 80.5% year on year. "We are confident that in the future, our Internet services will become more and more diversified."
In addition, the number of active users per month of MIUI increased from 171 million in 2017 to 242 million in 2018, an increase of 41.7% over the same period of last year, and the average income per Internet user increased from 57.9 yuan in 2017 to 65.9 yuan in 2018.
Speeding up the Development of Overseas Markets and Increasing R&D Investment Gradually
In 2018, the international market income of millet increased by 118.1% to 70 billion yuan, accounting for 40.0% of the total income in 2018, up from 28.0% in 2017. In the third quarter of 2018, the share of millet international market income reached its highest level of 43.9% in that year.
This is indispensable to the internationalization of Xiaomi's mobile phone business. According to Canalys's report, millet's smartphone shipments in India remained the first for six consecutive quarters, with a 59.6% year-on-year increase in the reporting period; shipments in Indonesia grew 299.6% year-on-year, ranking second in terms of market share in terms of shipments; and shipments in Western Europe grew 415.2% year-on-year, ranking fourth in terms of market share in terms of shipments.
In an interview at the Millet 9 conference, Lei Jun said that this year's focus of Millet's work must be to win over Europe. He expects the millet international market to soon surpass China's revenue. In addition, Lu Weibing, Vice President of Millet and General Manager of Red Rice Brand, revealed that independent Red Rice Brand should also undertake the international mission, and this year will also increase the expansion of internationalization.
To expand overseas market, patent and R&D investment are indispensable links, but also an important support to strengthen the mobile phone business.
In 2018, the overall R&D investment of millet was 5.8 billion yuan, an increase of 83.3% over the previous year of 3.2 billion yuan in 2017, compared with 2.1 billion yuan in 2016 and a compound annual growth rate of 66.2% in three years.
At present, the increase in R&D investment of millet has achieved initial results, such as the progress of millet mobile phones at the camera level; Nikkei China Net recently published a global list of AI-related patents for private enterprises, and the number of AI patents applied for by millet has risen from 85 last year to 11.