Xiaomi Chairman Lei Jun said in an open letter to investors today that in the face of global challenges and the crisis of the new coronavirus "black swan", Xiaomi's 2019 is a year of steady operation.
On March 31, after Xiaomi's 2019 financial report was announced, Lei Jun, Chairman of Xiaomi, issued an "Open Letter to Investors".
In 2019, Xiaomi Group's revenue exceeded 200 billion yuan for the first time, reaching 205.8 billion yuan, an increase of 17.7% year-on-year, and adjusted net profit of 11.5 billion yuan, an increase of 34.8% year-on-year, exceeding market expectations.
He said that the global mobile communications information technology industry is at a critical moment when switching from 4G to 5G, and Xiaomi has adopted a sound business strategy.
Xiaomi has made a series of major adjustments such as brand, product line, organizational structure and management system, laying a solid foundation for future development.
At the same time, Lei Jun said that the comprehensive net profit margin of Xiaomi hardware in 2019 is still positive and less than 1%.
The following is the full text of Lei Jun's open letter.
Dear Xiaomi investors and all friends who care about Xiaomi:
Hello!
At present, the world is still under the shadow of a new coronavirus. At such a very moment, there is no better information than friends. Sincerely wish you and your relatives and friends a healthy and peaceful.
We have just released our full year financial results for 2019. Compared with the growth figures, I would like to explain to you what kind of beliefs Xiaomi is adhering to and how it is adhering to when the global economy encounters challenges and even a "black swan" crisis occurs.
This is a year of sound business,
It’s also an aggressive year
In 2019, Xiaomi Group's revenue exceeded 200 billion yuan for the first time, reaching 205.8 billion yuan, an increase of 17.7% year-on-year, and adjusted net profit of 11.5 billion yuan, an increase of 34.8% year-on-year, exceeding market expectations.
Against the background of the Sino-US trade war and the global economic downturn, Xiaomi still achieved rare growth in the industry.
This year, we have won a series of landmark achievements. Xiaomi entered the Fortune Global 500 for the first time, becoming the youngest 500 company on the list.
We entered Brandz's global brand TOP100 for the first time, ranking 74th. Our smart TV also won the first place in the Chinese market for the first time, and set a record for single brand shipments in the Chinese market exceeding 10 million units for the first time.
Foresight, confidence, resilience and strong mobility are the keys to our continued progress.
The global mobile communications information technology industry is at a critical moment when switching from 4G to 5G. We have adopted a sound business strategy, continued to consolidate the foundation of capabilities such as quality, innovation, and delivery, and carried out brand, product line, organizational structure, and management systems. The series of major adjustments laid a solid foundation for future development.
Our mobile phone business officially launched a dual-brand strategy, and Xiaomi and Redmi's dual-brand spin-off and independent operation achieved gratifying success.
We have consistently ranked among the top four in the world, while operating steadily, achieving the world ’s extremely healthy inventory level, which is rare in the industry, and being lightly loaded has opened the curtain of 5G strategy.
As of the end of 2019, our revenue from overseas markets has accounted for nearly half, and Xiaomi has become a truly global company.
The Internet business is more dynamic and diverse. Our AIoT business has always maintained a global leading position and become the industry-recognized "smart life leader".
Behind this series of achievements,
Xiaomi always insists on technology
Xiaomi adheres to the technology industry and continuously increases investment in research and development. In 2019, our R&D investment reached 7.5 billion yuan, a year-on-year increase of 30% on the premise of a substantial increase for the past three consecutive years.
In 2020, we will continue to increase investment in research and development, which is expected to reach 10 billion yuan.
At the same time, we are also actively introducing top global R&D talents. For example, we have successfully invited Daniel Povey, a top expert in the field of artificial intelligence, to join Xiaomi.
Starting from 2019, we have specially set up the Xiaomi Technology Award, which awards a $ 1 million bonus to the core R&D personnel of the highest technical achievement project of the year. Last year, this award was shared by 10 engineers from the Xiaomi MIX Alpha project.
We have identified "5G + AI + IoT
Strategic Direction of the Next Generation Super Internet
5G is not just the network performance of mobile phones. AIoT is not just an AI technology or IoT platform. "5G + AIoT" is a service capability that runs through Xiaomi Group's entire product, platform, and scenario. It is the explosion of Xiaomi's Internet genes in the new era. "Title" is the key to truly bringing smart technology to our users.
At the beginning of last year, we proposed All in AIoT, which invested 10 billion yuan in five years. After a year of practice, it has fully verified the feasibility, correctness of strategic directions and the necessity of strategic investment.
At the beginning of this year, we have decided to continue to increase investment in this field, and will invest at least 50 billion yuan in the next five years, completely establishing an absolute leadership position in the field of intelligent life.
This is our initiative to create greater value for you, and it is also an action to implement the philosophy we adhere to. Letting billions of people around the world enter the world of connected things is the key manifestation of enabling everyone to enjoy technology to bring about a better life.
We always believe that a connected world is better than an isolated world, and smart devices are better than traditional tediousness.
Just as we firmly believe in the value of global economic cooperation, we believe in the power of science and technology to change the world.
Especially during the outbreak early this year, when we saw isolated people communicate with each other through smartphones, laptops, smart cameras, etc., and looked after parents, children and even pets separated from afar, we could feel the weight of responsibility and The desire to connect.
Human beings are a community of destiny, and at this moment, such beliefs are even stronger.
And we use technology to make the life of the human community better, which is Xiaomi ’s longing for the next generation of the super Internet.
Staying efficient is the ultimate strategy to overcome the crisis
At present, the entire industry and the world are facing huge challenges, but we have absolute confidence in overcoming difficulties and enjoying a peaceful period with our partners. The more harsh the environment, we believe the more significant Xiaomi's efficiency advantage becomes.
Because Xiaomi has been practicing the most stringent efficiency guidelines, it is not only the self-pursuit of extreme efficiency, but also objectively a precautionary measure: if winter passes through the four seasons, winter will die, and if winter passes the four seasons, then the four seasons will survive.
My colleagues and I have experienced the SARS epidemic 17 years ago and the financial tsunami of 2008. We know that the crisis is a test, the ultimate proposition to promote reflection, and the touchstone of corporate value, model and growth potential.
And our efficient operations, our fast and keen action, our close integration with users and the trust we have earned from users allow us to get opportunities from crises faster and embark on a healthier and lasting development path.
In Xiaomi's prospectus, we said that a company that truly achieves world-class efficiency will have the ability to cross the economic cycle, continue to seize new opportunities emerging in the industry, and maintain excellent operating performance for a long time.
We are more convinced now.
Over the past year or so, we have established an organization department to improve the effectiveness of internal management. At the same time, we have also established an internal training system, Qinghe University, started to implement a comprehensive rotation system at all levels, and strengthened recruitment of college students.
We are working to continue to improve efficiency and provide sustainable protection for its long-term existence.
Facing challenges, persistence is more precious than gold
The motivation of our continuous struggle comes from our mission: always insist on making good products that are “touching and pricey”, so that everyone in the world can enjoy the beautiful life brought by technology.
In order to ensure the sustainable implementation of this mission, before the IPO, our board of directors passed a special resolution, and we promised all existing and potential users: Xiaomi's comprehensive net interest rate on hardware will never exceed 5%.
This is both our commitment to our users and a testament to our efficiency.
Today, we are very proud to report to you that, just like last year, our comprehensive net profit margin for hardware in 2019 is still positive, less than 1%. While continuing to expand revenue and increase profits, we still hold fast to our commitment to our customers.
It is particularly worth mentioning that the new Xiaomi mobile phone brand re-launched early last year. After Xiaomi 9, Xiaomi 9 5G, Xiaomi CC 9 Pro, and the release of the Xiaomi 10 series this year, we successfully proved that the Xiaomi brand is unwavering. While expanding the high-end market, we can still be “moving and pricey” and continue to win the support of users.
Despite the impact of the epidemic, we remain confident and optimistic about the way Xiaomi is going. At present, the recovery of our production capacity has exceeded 90%. The experience of the Chinese market tells us that the epidemic will not destroy market opportunities, but only delay the arrival of "spring".
We believe that fate will always reward those who are optimistic, rigorous, and courageous, and now is the time to act. Xiaomi, who is outfitting lightly, will show a more aggressive attitude this year.
In a few days, April 6th will be our tenth anniversary. Over the past ten years, Xiaomi has created a series of miracles.
In the next decade, the steps of Xiaomi's vision into reality will go further and clearer. Thank you for trusting Xiaomi, investing in Xiaomi, and investing in the well-being of billions of people worldwide.
Lei Jun
3/31/2020
