Xiaomi Corp

any products in the pipeline, can you please shed some light on it? Second question, with the development of AI, we've seen the potential of large models on cloud. What's the potential and what are the opportunities for Xiaomi in large language models? But in terms of application, we're still not clear what possible applications could there be in terms of AI can you please share with us some information of AI being available on the terminals and different devices well regarding automobile well rather than focusing on products in the pipeline I'd like to talk about the current car our goal is to become one of the top five car players in the next 15 to 5 15 to 20 years that means we're not going to limit ourselves to any market segment rather will be a global car player the first car that we launched this year is a sea level luxury sedan this is our very first car it takes three years to develop a car That means, of course, we're developing some products in the pipeline, but not in the position to disclose any details. But as you can understand, cars must be developed in parallel. But I think now we need to sell the car, make it a good product, make sure that we have good customer satisfaction and we can deliver a good product. customer experience. That's the most important thing at this moment. You've also asked about AI large models. Xiaomi took the strategy of combining devices and cloud. Of course, on-premise deployment is not comparable to cloud technologies, but on-premise has lower costs and good privacy protection. we've seen higher computing power with on-premise devices. And we have seen higher efficiency of large models. So we will see lower cost and higher efficiency in on-premise devices. On 14 series, we've embedded a lot of AI functionalities. And with 14 Ultra, there are even more AI functionalities using our on-premise capabilities. With Ultra and 14 2.0, we will have more AI functionalities being embedded and built in with the current and future smartphone deliveries. Thank you. The next question comes from CICC. Thank you, Mr. Lu. Thank you, Alan. I have two questions. First, in internet services, both top line and GP market have seen record highs, especially revenue from advertising. So how do you plan to increase the profitability of internet services, especially advertising? My second question is a follow-up question on your expectation For the smartphone market, given your self-strategy, how do you look at the competition in smartphone markets, especially in overseas markets like Latin America? You asked how we could improve the GP margins and revenue level of internet services. I believe there are a few things to consider. First, existing customers. Last year, Globally, existing customers increased by 10%, adding 60 million new users. We had 629 million users globally. To Xiaomi, we believe our internet services are not just smartphones. You will take into account our laptops and tablets. As for a high-end smartphone brand, customer contribution matters a lot. We believe high-end market has contributed a lot to our recent development. On top of existing customers, we're going to improve customer experience and we're going to monetize more from customers. I think these three things have helped us a lot. deliver some positive changes over the past three years. You asked specifically about our advertising business. I have nothing to add. Perhaps my colleague can supplement some information. You've also asked about the competition in smartphone markets and Latin America. I think competition is always there. I don't think there is a particular year of intense competition. You will have competition here and there. To show me Latin America and Africa are two very potential markets. For example, in Africa, last year, our market share was less than 10%. But you can see that in North Africa, Egypt Morocco and Algeria our market share was twenty percent that means in sub-saharan Africa our market share was probably lower than nine percent and in sub-saharan Africa you have the huge you have the largest market in Africa at the end of last year our market share was twenty percent I just came back from Nigeria in the largest market in Africa, we could reach 20%. That means we can do that in other markets as well, because 20% is never the upper limit of our market share growth. I visited Latin America last year. In Colombia, our market share was 30%, but it was only 5% in Argentina. That means there is still some room for growth. I believe Xiaomi will still have some room for growth in smartphones. If we need to surpass Samsung, I mean, that's not just lip service. We're really doing that. Alan, anything to add? Well, I'd like to add a few numbers. The few regions you mentioned, for example, in Africa last year, our shipment increased by 45%, and the market only increased by 6%. As Mr. Liu said, our market share was only 8.9%, so there is some room for growth. In Latin America, the market increased by only 2% in shipment, but we increased by 11%. We have a market share of 16% in Latin America, ranking us third in the market. That means there is some room for growth. As for internet business, a number of customers will grow, and there will be more high-end customers. I'd like to add two things. First, last year, you probably saw that there was huge growth in advertising investment in the market as a whole. Of course, that was a boost to our business. As for international markets, with a larger user base in overseas markets, we are better in monetizing on international markets. Overseas markets took up 28% of the internet services as a whole. Of course, Some of the advertising revenue came from overseas because we are working with more business partners and we've attracted more advertisers with larger user bases. Thank you. The next question comes from Huatai Securities. Thank you, management. I have two questions. Both Mr. Lu and other investors mentioned AI, which is a hot topic. Mr. Lu mentioned the positive impact of AI on smartphones. Generative AI and large models will probably have a positive impact on IoT as well, I believe is the case. How do you enable your ecosystem and your OS with AI technologies? You touched upon the good demand from emerging markets. As a global brand, will you launch more products on top of smartphones in overseas markets in 2024? You asked about AI and its applications in the ecosystem. I'd like to give you a quick example. If you experience the built-in AI system in our cars, you will see that our AI system with the large models will understand the input very accurately. In the future, AI will become an important part in all products in our product lines, including all the products in the ecosystem, it's not to show off with superficial AI capabilities. There are some small features, but if you look at our operating system, there is something called HyperMind. This is active intelligence. That means in the future we hope our AI can actively perceive the need of human beings rather than passively receiving instructions from human beings. You've also asked about specific markets. I think it's very clear. Emerging markets are very important to Xiaomi, be it Latin America, Middle East, Africa, or Southeast Asia. They're all important. Most of the products available in this market are smartphones, wearables, tablets, TVs, and scooters, etc. We have more products to offer, but we still have some room for growth for these available products, and there are still other products which have not yet been available in those markets. In Chinese markets, IoT accounts for 50% of our products, but the number is only 20% in overseas markets. There is a huge market. However, we need to build better capabilities to sell our products overseas. Without these capabilities, we will lose control when we go to overseas markets. This is the most important thing when we are building a safe and highly efficient overseas market, and I think this will offer some inspiration for our future development in any market. Thank you. In the interest of time, now we are going to take the last question from Eastern Securities. Thank you. I'd like to ask two questions. The first has to do with R&D expenses. In 2023, you invested hugely in R&D. Mr. Liu said, show me would be a car maker covering all product categories rather than one market segment. So could you please elaborate on your R&D expenses? My second question has to do with AI again. I have a question that has to do with mid to long-term development of your company. How do you see the role of AI in improving your profitability. Can AI bring to Xiaomi some new profit models, or do you see AI merely as a tool to build a strong advantage for Xiaomi? How do you compete with other market players with your AI capabilities? Last year, our R&D expenses were $19.1 billion. The CAGR growth over the past few years was 35%. So going forward, Xiaomi will maintain a rather significant growth rate of our R&D investment. If you read our financial statement, R&D was a strong contributor to our profitability. I believe we will be committed to more growth I cannot give you specific numbers, but I don't think we have any questions on that direction. You asked about the role of AI in mid to long-term development. Well, is AI good or bad news to Xiaomi? Well, internally, we could confirm that it would be good news. in terms of customers scenarios and applications we're going to use the ai technology in the most positive way we have smartphone users we have iot users we have over 1 billion users globally so we can cover the most scenarios possible we have a huge amount of data And with that, AI can play an even more important role. I believe in that sense, AI will be a positive factor for Xiaomi. And with AI, we will find more profit models going forward using AI technologies. That is for sure. All right. Thank you. Thank you. This concludes the conference today. Thank you again for joining us. You may now disconnect. Thank you.