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Phone maker Xiaomi flags rising costs of chips, shares fall

25 March 2021 09:15 (UTC +04:00)

Chinese smartphone maker Xiaomi flagged on Wednesday rising costs from a global chip shortage and reported quarterly revenue below market estimates, even as its international business head jumped ship to TikTok owner ByteDance, APA reports citing Reuters.

Shares in Xiaomi Corp fell as much as 9% in early morning trading on Thursday, before paring losses to trade down 5%.

Xiaomi is the latest in a line of global companies to warn of an extreme chip shortage, which initially hit production at car companies including Volkswagen , but is now pressuring makers of smartphones and consumer electronics.

As well, Xiaomi’s strategy to diversify revenue by investing in financial technology firms has run afoul of China’s running crackdown on such companies.

Revenue in Xiaomi’s internet services unit, which houses the fintech business, rose just 8% in the fourth quarter.

“Tightening regulations on the fintech business would weigh on 2021 (estimated) earnings growth,” Daiwa Capital Markets analyst John Choi said in a note.

Still, Xiaomi’s sales jumped by 25% in the quarter ended December to 70.46 billion yuan ($10.79 billion), and adjusted profit rose 37% to 3.20 billion yuan. Analysts had expected revenue of 75.23 billion yuan and a profit of 2.94 billion yuan, according to Refinitiv data.

Smartphone sales, which account for the bulk of Xiaomi’s revenue, rose 38% to 42.6 billion yuan.

The company’s shipments in China surged by 52% from a year earlier as it grabbed market share from rival Huawei Technologies Co Ltd, which has steadily retreated from the global market due to U.S.-led sanctions, helping Xiaomi corner 15% of the domestic market share.