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Smartphone sales' profits hit by competitive and large scale investments

As per RoC data, Xiaomi, which markets some of the top-selling handset models such as the Redmi series, has reported a net loss of Rs 148.5 crore in FY19.

Published: 11th December 2019 11:34 AM  |   Last Updated: 11th December 2019 11:34 AM   |  A+A-

Smartphone, Apps

For representational purposes

By Express News Service

The year 2019 has seen smartphone makers bring in exciting technologies to stay afloat in a hyper-competitive market. Intense price wars and large scale investments by the brands, however, have taken a toll on their profits.

In the financial year 2018-19, market leader Xiaomi India ended up in the red for the first time since its entry into the domestic market in mid 2014, while runner-up Samsung India Electronics’ consolidated net profit fell over 58 per cent to Rs 1,540.5 crore in 2018-19, according to regulatory filings.

As per RoC data, Xiaomi, which markets some of the top-selling handset models such as the Redmi series, has reported a net loss of Rs 148.5 crore in FY19 as compared to a net profit of Rs 302 crore a year ago.
By revenue, Xiaomi continues to be behind Samsung which had clocked mobile phone sales of Rs 43,087.9 crore in FY19 as compared to Rs 37,349.7 crore in FY18.

On the other hand, Xiaomi continued its high pace of growth in India where it grew by 54 per cent to Rs 35,426.92 crore in FY19. Samsung’s overall revenue also grew by 19.7 per cent to Rs 73,085.9 crore. The net loss, Xiaomi said, was due to "increase in the expenditure overhead and competition in the local and global market."

Analysts also attributed Xiaomi’s loss to price war in smartphone and smart televisions where it had forayed last year, and for expansion of the business into brick-and-mortar stores which involves higher spending on distribution network and lower margin unlike e-commerce which was the company’s mainstay till FY18, while ace competitor Samsung has a presence across price points, including the premium segment, where Xiaomi has no presence till now, thereby resulting the Korean giant to realise higher sales. Samsung also launched online-only smartphones and televisions at aggressive pricing to take on competitors.

According to market tracker International Data Corporation, Xiaomi continues to be the largest smartphone maker in India by shipment volumes with 27.1 per cent share as of September 2019, followed by Samsung with 18.9 per cent share, Vivo (15.2 per cent), Realme (14.3 per cent) and Oppo (11.8 per cent).

Oppo and Vivo also continued their strong pace of growth in the domestic market in FY19, with both brands together pushing parent BBK Electronics Corp’s India revenue near the Rs 40,000 crore milestone in their fifth year of operation. As per the latest RoC filings, Oppo’s sales went up by 80 per cent to Rs 21,525 crore, while Vivo grew by 54 per cent to Rs 17,202 crore in FY19.

However, BBK Electronics is still not making money in India with both Oppo and Vivo yet to breakeven. While Oppo’s net losses went up by 93 per cent to Rs 688 crore, Vivo managed to reduce net losses to Rs 19.09 crore from Rs 124.29 crore in FY19.

  • Rs 148.5 crore: Xiaomi’s net loss in FY19
  • Rs 688 crore: Oppo’s net loss in FY19

In the lead

According to market tracker International Data Corporation, Xiaomi continues to be the largest smartphone maker in India by shipment volumes with 27.1% share as of Sept 2019.



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