Xiaomi Corp

Welcome to Xiaomi Group's 2025 Q3 results presentation, investors conference call and webcast. So if there are any issues, you may hang up now. During the Q&A session, if you have questions, please press star one. To cancel, please press star two. May I ask general manager of IR department and PR department to host this call? Good evening, everyone. Welcome to Q3 2025 earnings call for investors of Xiaomi Group and also the webcast. Before we begin, let me remind you, in this event, there may be forward-looking representations and statements, and they will be affected by different uncertainties and risks. And in the future, there will be various factors that may lead to the situation that the points made today may not happen. And when it comes to information about the market, they are outside of Xiaomi company's channels. And there are information and financial metrics that are unaudited, non-IFRS criteria-based. And so... In attendance today, we have partner and Group President of Xiaomi, Mr. Lu Weibing, Xiaomi Group Vice President and CFO, Mr. Alan Lam. At the beginning, Mr. Lu will share our latest strategic update and also our business operations. After that, Mr. Alan Lam will present our results for Q3 2025. After that, we'll move on to Q&A. Now I will pass the floor to Mr. Liu. Good evening, everyone. Welcome and thank you for joining our Q3 2025 earnings call. As you already read from our financial statements, this quarter, Xiaomi once again delivered a solid financial performance. In Q3, amid a rapidly changing external environment and intense competition, Xiaomi's business lines maintained steady growth. Group total revenue reached $113.1 billion, up 22.3% year-on-year, marking the fourth consecutive quarter exceeding $100 billion. Group growth profit margin reached 22.9%, up 2.5 percentage points year-on-year, hitting a new record high. Our adjusted net profit reached $11.3 billion, up 81% year-on-year, setting a new record high. In terms of specific business operations, there are several highlights. First, our 17 series achieved a remarkable success with total sales increasing 30% compared to previous generation. The pro version accounted for over 80% of sales with pro max model proving most popular. We achieved a historic breakthrough in the 6,000 plus price range. Our major home appliance factory commenced operations. This marks our third largest scale smart factory, following its smartphone and EV facilities, representing a significant stride forward in smart manufacturing. Internet revenue reached record high. Innovative segments including EV, AV, AI and other new initiatives achieved profitability for the first time in a single quarter. Given recent changes in the external environment and industry competition, there are several key concerns about Xiaomi, such as whether Xiaomi can ensure supply chain stability and future trend of smartphone growth margins amidst rising memory costs and rapidly shifting supply-demand dynamics, impact of industry competition on our IoT business, updates on our EV initiative. So today we will answer these questions and share information and more insights with you. First, regarding personal devices, in Q3, we ranked among the top three in global smartphone shipment with market share of 13.6%. Apart from India, we achieved year-on-year market share growth in all regions. except India. And in China, our smartphone shipments saw another year-on-year increase in market share reaching 14.9%. We ranked second in Latin America and Middle East, with market share increasing 1.5% and 0.5% year-on-year to 17.9% and 16.9% respectively. We ranked third in Europe, Southeast Asia and Africa, with market shares increasing by 0.5%, 1.2% and 0.9% point year-on-year to 20.9%, 16.7% and 12.6% respectively. During the recent Double 11, Xiaomi smartphones secured top spot in domestic smartphone sales for third consecutive year. claiming number one position across all major e-commerce platforms. This year marks the fifth year of our premium strategy. Our premium strategy yielded significant results. In Q3 this year, market share in the RMB 4,000 to 6,000 smartphone segment in mainland China increased 5.6 percentage points year-on-year to 18.9%. targeting the ultra premium segment above rmb 6000 is a new objective for the second five year phase of premiumization our 17 pro max starting at rmb 5999 during double 11 it claimed double crown for both sales volume and revenue among domestic smartphones in the 6 000 plus segments continuous breakthrough in ultra premium segment not only optimize our product portfolio but also drive sustained growth in overseas sales volume. We continue to drive premiumization through breakthrough in core foundational technology. In August, we officially launched Xiaomi HyperOS 3, delivering comprehensive upgrade across core experience, functional features, and AI capabilities. We further enhance system fluidity and responsiveness while introducing the groundbreaking Xiaomi Hyper Island for an entirely new interactive experience. During the launch of Xiaomi HyperOS 3, overall user feedback matrix showed significant improvement. Xiaomi 17 Pro Max is innovatively adopted a SuperPixel array, delivering 2K level display quality while consuming less power than a 1.5K display. Global supply chain is undergoing a new cycle with storage costs currently entering an extended period of sustained increase. However, having navigated various raw material cost cycles, we have established robust supply chain management system and contingency mechanism. We remain confident in ensuring stable raw material supply. Regarding pressure on the future growth margin from rising storage costs, in the short term, we can mitigate cost pressure through product mix upgrades ASP increase and other measures. At the same time, we hope everyone recognizes that business beyond smartphones will provide stable support for our overall profitability. Over the past 10 quarters, our smartphone times AIoT segment has consistently maintained gross margin above 20%. In the long term, we'll continue advancing premiumization and building differentiated product capabilities based on self-developed chips and operating systems, aiming to reduce marginal impact of commodity price volatility on financial metrics. Second, impact of industry competition on IoT business. In Q3, our IoT business revenue was $27.6 billion, marking seven consecutive quarters of year-on-year growth, growth margin 23.9%, achieving seven consecutive quarters of year-on-year growth margin improvement. Although our IoT business encompasses a wide range of product categories, we adhere to a clear picture to be an industry contributor that drives value creation through product and technological innovation. Therefore, we neither initiate price war nor politely follow them. We do not rely on low price to capture market share. Instead, we activate user demand and propel industry development by enhancing product value and increasing innovation investment. In Q3, our ASP for refrigerators, air conditioners, and washing machines all achieved year-on-year growth. In September this year, we launched the Media Triple Zone Washing Machine Pro, which garnered a 99% positive rating across all e-commerce platforms following its release. And in October, Xiaomi's smart home appliance factory commenced operations, marking completion of our major appliance business integrated industrial cycle spending design R&D product validation. This smart factory is designed for peak annual capacity. 7 million units. Moving forward, more high-quality smart home appliances will be designed, developed, and manufactured here, continuously supporting Xiaomi's strategy to elevate all product categories. Overseas IoT revenue also reached record highs this quarter. In 2026, we'll intensify our overseas market expansion to drive further growth in IoT revenue. Then in Q3, we delivered 108,796 new EVs. Cumulatively, we delivered 265,967 new EVs in the first three quarters. In October, monthly delivery exceeded 40,000 units. We are enhancing monthly delivery capacity through ongoing technical upgrades and expect to complete a new delivery target this week. Next year's delivery scale is projected to maintain steady growth. Our Smart EV, AI and other new initiative segments achieved first quarterly profitability. We continue expanding our sales network. By the end of September, we had opened 402 EV sales centers across 119 cities in mainland China. Our service network now comprises 209 locations covering 125 cities. And then in September this year, we offered Xiaomi car owners customization services once exclusive to luxury vehicles. We firmly believe that enabling everyone globally to enjoy a better life through technology should include providing opportunities for personalized self-expression. We recognize that EV industry still holds abundant dynamic scenarios and user needs awaiting our fulfillment. We are confident that our next vehicle will earn user recognition and support. Overall speaking, in July 2025, we're named to the Fortune Global 500 list for the seventh consecutive year, ranking 297th. We expect for Xiaomi to become a top 100 global company by 2030. We remain unwavering in our commitment to high-pressure intensive investment in foundational core technologies. This year, R&D expenses will exceed $30 billion, with projected R&D investments surpassing $200 billion over the next five years. AI is driving profound transformation across all industries. With over 1 billion devices connected globally, Xiaomi leverages AI to deliver ubiquitous intelligent experience to users worldwide. We believe deep integration of AI with the physical world represents the next frontier in intelligent technology. We began intensifying our AI investment several quarters ago. While we cannot disclose too much, our progress in large AI models and applications has far exceeded expectations. We are confident that in the near future, we'll continue to deliver surprises for everyone. Finally, I would like to thank all our users for their support. And as always, we extend our gratitude to our employees and partners for their continued trust. And that concludes my presentation for today. Now, let me turn over to CFO Allen. Thank you, Mr. Liu. Good evening, everyone. As Mr. Liu shared with you just now, in Q3 2025, guided by the group's core operational strategy of steady and progressive advancement, all business segments continued to demonstrate resilience. In Q3 2025, we achieved total revenue of RMB113.1 billion, up 22.3% year-on-year. Growth margin reached a record high of 22.9%, up 2.5 percentage points year-on-year. smartphone times aiot segment generated revenue of 84.1 billion rmb with gross margin of 22.1 percent so since establishing the mobile times aiot business segment we have achieved year-on-year growth for three consecutive quarters with gross margin increasing by 1.3 percentage point year-on-year And then for smartphone segment, revenue for the quarter reached 46 billion RMB, accounting for 40.6% of total revenue. Our global smartphone shipments reached 43.25 million units this quarter, marking a 0.5% year-on-year increase and extending our streak of year-over-year shipment growth to nine consecutive quarters. Our premium strategy has yielded significant results with continuous enhancements in product competitiveness. According to third-party data, In Q3 2025, our share of premium smartphone sales in mainland China reached 24.1% of total smartphone sales, up 4.1 percentage points year-on-year. According to Omdia's data, we ranked third globally in smartphone shipments this quarter, with a 13.6% market share, maintaining a top-three global position for 21 consecutive quarters. Third-party data indicates that we ranked second in mainland China smartphone sales during Q3 2025, with market share up 0.7 percentage point year-on-year, In 57 countries and regions globally, our smartphone shipment ranked top three and among the top five in 68 countries and regions. In Q3 2025, our mobile phone growth margins stood at 11.1% due to intensified competition in mainland China. For IoT, last quarter, our revenue was 27.6 billion RMB. This quarter, overseas IoT business revenue hit a record high. This quarter, our IoT growth margin was 23.9%, up 3.2 percentage points year-on-year. As of 30th September 2025, our IoT platform had connected over 1 billion IoT devices. According to OMDS data, In Q3 2025, our tablet shipments ranked among the top five globally and among top three in mainland China. Our wearable band devices ranked first globally in shipments and second in mainland China. Our TWS ranked second globally in shipments and first in mainland China. In October 2025, Xiaomi Smart Home Appliance Factory officially commenced operations, marking the completion of our integrated industrial ecosystem spanning design R&D production validation loophole. Phase 1 of the Xiaomi Smart Home Appliance Factory represents a total investment exceeding 2.5 billion RMB with planned peak annual production capacity of 7 million air conditioners. It has already achieved industry-leading standards in both efficiency and quality. For internet services, we continue to expand our user base. In September 2025, our global MAUs reached 742 million. and 8.2% increase year-on-year. Within mainland China, MAUs reached 187 million, up 11.6% year-on-year. In this quarter, our internet services revenue reached a record high of 9.4 billion RMB, up 10.8% year-on-year. Growth profit margin for the internet services segment reached 76.9% this quarter, benefiting from sustained MAU growth and ongoing premiumization efforts. Our advertising business continued to drive internet services growth, generating revenue of 7.2 billion RMB this quarter, up 17.4% year-on-year. Overseas internet services revenue reached 3.3 billion RMB this quarter, up 19.1% year on year, accounting for 34.9% of total internet services revenue and setting a new record high. In Q3 2025, our SmartEV, AI and other new initiative segment generated revenue of 29 billion RMB, accounting for 25.6% of the group's total revenue. Within this segment, revenue from smart EV sales reached 28.3 billion RMB, while other related business revenue amounted to 700 million RMB. This segment achieved a gross profit margin of 25.5%. In Q3 2025, we delivered 108,796 new EVs. With ongoing deliveries of the SU-7 Ultra and U-7 series, our average post-tax unit price reached 260,000 RMB this quarter. Our new business segment achieved its first quarterly operating profit of 700 million RMB. We are steadily executing our group's new 10-year goal. making large-scale investments in foundational core technologies, and striving to become a global leader in next-generation cutting-edge technologies. In the third quarter this year, our R&D expenses reached 9.1 billion RMB, up 52.1% year-on-year. For the first three quarters this year, our R&D expenses totaled 23.5 billion RMB. As of 30 September 2025, our R&D personnel reached a record high of 24,871, accounting for 44.2% of total headcount. In the first three quarters of 2025, our CapEx reached 13 billion RMB, an increase of 87% year-on-year. We continue to reward shareholders through share buyback. So far this year, we have repurchased about 1.54 billion Hong Kong dollars worth of shares, equivalent to about 34 million shares. In terms of net profit, our adjusted quarterly net profit has hit record highs for four consecutive quarters, reaching 11.3 billion RMB, up more than 80% year-on-year. Finally, in terms of ESG, in terms of ESG ratings in October 2025, our MSCI ESG rating was upgraded from triple B to single A, marking the third consecutive year of rating improvement since 2022. In September 2025, we achieved a record high score of 63 points in the latest S&P Global Corporate Sustainability Assessment and marking the second consecutive year of score improvement. In September 2025, we're successfully included in the Forbes 2025 China ESG 50 list. In October 2025, we're named to the 2025 Forbes Global Best Employers list marking Xiaomi's third consecutive inclusion on this prestigious ranking. Thank you all. That concludes what I wanted to share with you today. Now we can begin Q&A session. Thank you, Mr. Allen. Now we will move on to Q&A. In order to allow more investors the opportunity to ask questions, please ask no more than two questions each time. Thank you. Thank you. So we will begin Q&A session now. If you have questions, please press star one. To cancel, please press star two on your keypad. Thank you. First question is from Morgan Stanley, ND. Please go ahead. Thank you, Mr. Liu and Ellen, for the sharing. Congratulations, Xiaomi, for achieving record high profitability. in this quarter, I have two questions. First question is about smartphones. The capital market is concerned about the big cost increase in internal memory. So we are concerned about the impact on smartphone gross margin. And can you share your expectation about the price change? And also for EVs, your delivery has been rising in these two months. And your Su 7 Pro and Pro Max delivery schedule has been advanced significantly. So can you share with us the reasons behind such change in the future? What is your development strategy for your EVs? What will be the change? And what will be your major directions? Thank you. Thank you, Andy. let me take your first question and i will ask ellen to answer the second question so the cost of memories and its impact on smartphone now when it comes to cost increase i think this is a long cycle a relatively long cycle so for cost increase for memory in the past usually it would be over in a few years but now the situation would be different from in the past so basically This is because of HPM that caused the change. So right now the cycle is longer because of demand. In the past, for smartphones, basically there are smartphones and notebooks and tablets together. Now there is HPM being added. So as a result, there is bigger demand. And then supply is insufficient. In 2023, for internal memory, that was the base level in price. And at that time, cost continued to fall. I think you are aware of that. And I think for new production and output, that was one factor as a result. There is longer cycle of demand increase, but supply did not catch up. That's the basic situation. And this caused big impact on cost of smartphone. And for internal memory of smartphone and the relative cost, there is a price difference. And this price difference will continue to be narrowed. That is my view. And given this long cycle cost increase, then definitely that would be quite big impact on gross margin for smartphones, tablets, and notebook computers. So because of a bigger ratio percentage of the internal memory, so there is quite big impact on gross profit. And given such impact on gross profit, I have come up with solutions. The first solution is that you have to do something with products you have to increase price but comparing with other peers I think cost increase is bigger than price increase so that's the first point and then we have to also do some digestion in the supply side and as a result there will be decrease in gross profit and we can also optimize product structure for internal memory cost. Its ratio in high end product and lower end product will be different. So in the past few years, we have been implementing premiumization and we increased our ASP. We hope that the competitiveness of the product can be enhanced. And this is something that we have been doing in the past few years. and we hope that this can offset some of the cost increase impact. And in Q4 and next year, I believe the cost increase of memory in relation to smartphone, tablets and notebooks, well, that would be impact leading to a decline in gross margin, but the extent may be different. So when it comes to 2026, I think we will be able to ensure our supply. Thank you. Let me supplement to Mr. Liu's answer, and then I will also answer your question about EV. Well, you can see that last year, starting last year, in our financial statements, we have a segment, smartphone times AIoT, and then smart EV and AI business. In the past quarters, we can see that growth margin is above 20% for smartphone times AIoT. So we have the capability to offset the situation. Our IoT growth margin is healthy. So for this segment, it is quite stable. It is more than 20% in growth margin. That's the first point. I would like to supplement to Mr. Liu's answer. The second question is about EVs. So you asked about our delivery volume, which is rising. We are a young company in the automobile industry. And then in terms of product delivery, we only started for 18 months. But so far, our total delivery exceeded 400,000 units in July and August. By means of some transformation, we have exceeded 40,000 cumulative delivery in September and October. So our delivery is rising. As Mr. Liu said, this week we will be able to complete the target of more than 350,000 units set at the beginning of the year. So in terms of our delivery capability and also our quality of reform, we have put in much, much effort. And then recently, if you look at our PRO MAX 27 delivery timetable, it has been shortened a lot. As I mentioned earlier, we enhanced efficiency in order to enhance delivery. At the same time, at present, some materials are still subject to constraint. So we are enhancing our 27 and 27 MAX delivery capability. And in the future, we can accelerate our delivery cycle of other products. So these are my answers to your two questions. Thank you. Okay, very clear. Thank you, Mr. Liu, and thank you, Alan. Thank you. Next question is from City, Kina. Please go ahead. Thank you, management, for this opportunity. I have two questions. Based on Andy's question, I have a follow-up regarding your overall strategy. As what Mr. Lu said about demand and supply and the overall layout, and also the impact on smartphone from memories. Well, next year, in terms of your smartphone strategies, in terms of profitability, Are you going to make adjustment to your delivery strategy regarding premiumization in the future? So you set a target of 30 million. So in the future, will you be subject to price adjustment impact? And are you going to reach the target earlier than expected by making some adjustments? And then secondly, I have a question about EVs. So for those who have already bought your EVs, so regarding subsidies to them next year, what would be the impact on your gross margin? And given this impact, given your efficiency enhancement, is it enough to offset or will it give more room for more development next year. Thank you. Okay. Regarding smartphone retail price, if it increases, then our judgment is that there will be a downturn in the overall smartphone market. That's my overall judgment. But how much? Well, of course, I can't really quantify in detail now. Now, for smartphones, it is still a retention market for the time being. And in the past few years, when it comes to product quality and experience, it is very good. So I think that is the situation. That's my overall view for Xiaomi in 2023. we have been seeing that our sales volume and also our profit and scale, we have seen a change in our strategy. In the past, we made a judgment of the overall market. Market share is still important to us. In the China market in the past few years, If you look at our peers, last year we had 15.8% share and now around 17%. I think that's our overall strategy. But still we have to try to enhance our ASP by 2030. We hope that we can achieve a scale of 30 million in terms of our premium strategy. So in five years' time, every year, I hope that that would be an increase by like 2 to 3 million units. And then so far, our premiumization direction will not change. So I will defer to Alan to comment on your next question. Thank you, Mr. Liu. First of all, Regarding EV's gross margin, in relation to EVs, this year, we delivered more than 350,000 units. This still accounts for a small volume in the industry. As you know, the total in China is 22 million units a year. So within the short term, volume is still a target, and gross margin is not our most important target. With the vacancy tax, we can see some of the peers have also introduced some similar concessions. Now, our delivery cycle is longer. We hope our users will continue to support our EVs. And regarding the vacancy tax, regarding next year's ASP and our growth margin, there will be certain impact. However, our current growth margin is at a healthy level. So we hope that while we can maintain or guarantee our delivery, we can still maintain a healthy growth margin. Thank you. Thank you. Next question is from CICC, , please. Mr. Liu, Ellen, good evening. I have two questions for you. AIoT numbers in this announcement you said that the AIoT connected device for the first time exceeded 1 billion and the growth rate is more than 20 percent and just now you said that for AI no matter whether it is the MIMO model and the subsequent launches in the future in relation to AI layout and also combining with or connecting with your tablets, smartphone, notebook, and appliances, what would be the ecosystem and application of AI? Second question is about large appliances. In Q3, large appliance business, because of phasing out of national subsidy and competition, there is some year-on-year pressure. So in the future, what will be your tactics in large appliances? For overall IoT business, what is the outlook? Thank you. Regarding IoT connections, I think you can pay attention to our directions and a few information. First, in 2023, so from MIUI to VLAN, MUA, and so on. So now they have become the hyper OS. So that's the first thing I would like to share with you. And then we are creating a whole ecosystem. We hope that with deeper integration, we can offer a better experience. Besides, starting from October, we announced an open source model, and that is Xiaomi MiLockO. So it is like a large model. That's MiLockO. So Xiaomi uses the large model technology in the home scenario. And we believe that for smart home appliance, this is going to be a very good exploration. So AI large model plus Xiaomi IoT devices, these are connected and integrated. At the same time, for smart home appliance, it will get away from traditional hardware-based systems. we are moving into a new way of delivery interacting vision as well as language so this is very important besides we will go according to these two directions in the future I'm sure the business will rise and we have built our large model team for one year or so and very soon you will see its output We hope to have better algorithms, power consumption, and so on. These are some of our targets. At the same time, we have to focus on our own strengths as well. Regarding phasing out national subsidy and its impact on large appliances, my view is this. For national subsidy, it is only a help in a certain stage, but it will not exist forever. No matter whether it is increase or decrease, well, we have to understand that it won't be forever. And then we also would consider when national subsidy will be terminated and what we should do in the future. Now, if you look at some of our data this year, in Q3, you will realize that our ASP is still rising. Our product structure is still good. Our innovative products are being launched continuously. Our growth margin is at a good level. Besides, our globalization is accelerating. So I think all these are some good ways to solve changes or tackle changes in the external environment. And number three, in September, in Wuhan, we started our operation of our smart home appliance factory we have spent almost 10 years time and then if you have the time please go to wuhan to take a look at our smart home appliance factory it is quite a good one the environment is good the equipment is very advanced it doesn't look like a traditional home appliance factory. It is very advanced and very smart. It is highly automated and AI technology is used in the overall layout and design. So for smart home appliance factory, the technology is also very advanced. This helps our production process. And then we can also empower our working partners So I think that in the area of large appliances, these are our directions. So regarding competition and national subsidies phasing out, there will be short-term impacts, but there won't be long-term impact on our direction. And basically, we are executing according to our targets. So there won't be change. There won't be big change to our overall objectives and targets in relation to large appliances. Thank you. Thank you, Mr. Liu. We do look forward to some more pleasant surprises in relation to AI models. Thank you. Thank you. Next question. From CITIC. Please. Thank you, management. Thank you, Mr. Liu and Alan. I have two questions. I'm Liu Bingxie. question about automated autonomous driving. Recently, Mr. Lei on Weibo talked about upgrading in terms of autonomous driving. So in the future, What level can you reach because of such enhancement in autonomous driving? And regarding your overseas development, so what is your progress? What is your store layout? And what is your future plan in the process? How do you strike a balance in terms of traditional distributors in overseas markets? These are my two questions. Thank you. Autonomous driving. My view is this. I think for future smart EVs, autonomous driving is a critical point. So all along we have been working on that. Autonomous driving is a very important direction for our EV development. And basically, we are working towards this macro direction in our investment and deployment. So you can see that there are low, mid, and high standard configurations. So when it comes to our algorithm, we are equipped with LiDAR and also very high level configurations. In the future, we have upgraded to 1,000 clips. In the past, 3 million. Now we have upgraded that to 10 million clips. So that means the quality of our driving has improved a lot. So you can see from all our parameters and data, you can see the enhancement from 3 million clips to 10 million. And recently, there were also a number of announcements. HHG new version and so on, I think. you are able to see all the enhancements. And recently, you may be paying attention to our large model. So recently, the MIMO model had made much progress. In April, we have introduced another model in May The multimodal model in September, the large language model. So language, voice, and multimodal. So all these have been announced. In the future, no matter whether we talk about the autonomous driving or our cabin, that is our cockpit, that would be big support, and our algorithm is enough we have enough amount of data. So I think all these will enhance the overall assisted driving experience. So you can pay attention to our advancements. So I'm sure you have paid attention to the details showcasing our strengths. For overseas, We are following our established strategies. So for East Asia, Korea, Japan, we have already penetrated the markets in Europe also. For Southeast Asia, we are building our stores in high density. Latin America, North Europe, and so on, we are doing a lot of work. And then for new retail, we are doing a lot of development in overseas and efficiency is also being enhanced. So I think our output is quite satisfactory. Recently I went to Singapore and I took a look at our store. It is very good. So the scale is 2 million. And this year in terms of categories and overseas, Comparing with mainland China, there is still a gap in the Japanese market. Many categories are not there. So in terms of product channels, I find them very good. And there is no conflict between these developments. For traditional channels, I think they are more professional channels. They sell smartphones, they sell large appliances, so they are specialty stores mainly. And then for Xiaomi, very often, many of our product categories are placed and sold together. So if you come to Hong Kong, you can see many of our stores. If you go to Fortress, And also, for example, Broadway, you can get our products in Europe, in Spain. You can also see different scenarios. But then, in fact, I don't see a big conflict among these different channels. Thank you. I have no other questions. Thank you. Thank you. Next question is from Zoe of UBS. Please go ahead. Thank you, management, for taking my question. So we have talked about storage and memory a long time. I have a small follow-up question. Just now, Mr. Liu said that you have been proactive in inventory management. So for your existing inventory level, comparing with the beginning of this year and same period last year, what is it like? And then about MIMOCO after launch, so in the smart home appliance development it has aroused much discussion and many hardware vendors are doing a lot of supporting facilities so my question for the management is can you share with us about minoco in the medium term what is your plan and after the exploration stage are you going to maintain the openness of the ecosystem or when you reach a certain level are you going to internalize it to your own within your own Xiaomi ecosystem please okay regarding our management we are well when there is cost decline then we won't keep inventory and vice versa, and everybody is doing this. So this year, you want to build up your inventory, but you may not be able to do it. At present, I think our situation is okay in this industrial chain. I think if you think of Samsung and other partners in the US, we have good working relationship. We have good working relationship with the domestic suppliers. So in terms of the supply chain priority, I think we are exercising good management. You don't need to worry too much about our inventory. And if you look at our gross margin of products, you will see for yourself, I think we are doing quite well. I think people know the impact of cost on gross margin. And I think our management has been quite good. You don't need to worry. And you talked about Miloko. Yes. As I mentioned earlier, We have been cultivating deeply in AIoT, and we have spent one year in exploring about large models. I think we have got a clear view for traditional smart home appliance. Well, we have also making it smarter with our large models. And there is better interaction between human and machine. I think we will keep our ecosystem open in the future. I think we will share more about R&D with you. So don't worry. We will maintain openness of our ecosystem. Thank you, Mr. Liu, for the answer. That's all from me. Thank you. Thank you. Next question. It's from Huatai Securities. , please. Thank you, Mr. Liu and Ellen. I have two questions. First is about storage or memory. In the past few years, Mr. Liu said that the overall smartphone market is stable. There are like six to seven players all over the world and with more or less stable volume. So what do you think about this wave? Will this wave lead to a big change in the overall smartphone market? And in terms of product and pricing strategy, how are you going to change after this cycle? How can you make one step forward? That's my first question. Second question, about the positioning of your factory. for large appliance business of Xiaomi you are within top three in various categories and after the opening of the Wuhan factory for your large appliances product lines what is its role in the future when Wuhan factory starts production how are you going to go up one step or one platform in the large appliance business okay today Globally, the smartphone industry, it has entered a relatively stable situation. Apple, Samsung, $200 million for us, more or less. Other vendors, like $150 million, that's the situation. Given such overall layout, within a certain period of time, there won't be much change. at this time cost increase is very big and it is going to last longer time so that would be bigger volatility cost digestion for each player will cause impact the cycle is more or less the same for all but if your asp is relatively low then you will be subject to more impact so the cost increase will do larger impact on these players. In Q3, in Q1, Q2, cost increased, but not to a large extent. In Q3, the cost increase was big. And then in Q3, we can digest the Q2 inventory. And then in Q4, the inventory will be that after price increase. So you can see the market reactions. in china um i think the layout is not formed yet we have seen an increase by one percentage point for xiaomi but then the gap has not widened so there is much involution this year at the highest 17 points at the lowest around three points so the difference is one to two points among different companies at the end of the day I believe it is a must that we will see a different layout. So who is better prepared? Then who will be better off? So when you are in difficult position, then in a more competitive situation, your strengths will help you survive. So we need to rely on our own strengths to enjoy a better position. so i think we also have to look at the long-term position and long-term supply and basically the overall situation is quite certain changes in china are the impact will be bigger than that in the global market. And then regarding Wuhan factory, my view is this. In terms of factory and OEM, I think we are working on a two-pronged approach. That is our long-term strategy for smartphones and large appliances. When we build the large appliance factory, We give a lot of focus to our working partners. We had much communication. Of course, we have accumulated long-term strengths already. If you go to our Wuhan factory, I will extend invitation for you to pay us a visit. Our factory is different. The degree of smartness is much higher than other players. If you have visited our smartphone factory, actually our smartphone factory equipment capability is being also transplanted to a large appliance factory. So the smart platform is being migrated. The whole control system is done by Xiaomi. So this is something that we are very positive about. no matter whether you talk about control system or equipment they are all by Xiaomi secondly the degree of automation if you go to existing production lines you'll see our efficiency and our efficiency of manpower is much higher than others and if you look at our inspection positions in many positions for traditional production they rely on manual inspection and because they use their naked eyes then the error rate is also higher but for us we use ai to do inspection efficiency and accuracy is greatly enhanced that's the value of our factory and after realizing such value then we will also transfer this technique to other OEM factories. They will have to transform the factories based on Xiaomi's standards. It's like Apple. Apple doesn't have any factory now, but all the OEM factories have to follow their standards. We are talking about the same global standards for Apple. So that is what we are doing now. and for our own factories we are manufacturing high-end premium products so these until higher technology and then for the OEM factories and partners we will ensure that their existing capacities will not be affected and if there is a need to reduce capacity, we will first do it with our own factories to ensure the position of our partners because we have long-term working relationships. Please don't worry. These are undertakings to our long-term working partners. So then for our working partners, overall capability and efficiency enhancement, I think this is very helpful. you may feel free to communicate with our working partners to get more understanding. This year, actually, right now for our smart factory, it accounts for only 10% of the total capacity, but it also gives very strong management of our overall smartphone factories. So that's my answer to you. Thank you. Thank you. Next question from Goldman Sachs, Timothy. Please go ahead. Thank you, management, for taking my question. I have two questions. First, regarding your business in mainland China, you have 18,000 stores already, so in the future, What would be your expansion rhythm and long-term strategy? Overseas IoT revenue has reached record high. So in the future, will it continue to rise with expansion of overseas new retail? For revenue, overseas revenue growth rate, how much will it be? Second question, about expenses. In Q3, for smartphone and IoT segment, operating expenses grew fast. So in the future, for smartphone and AIoT segment, what would be the expenses ratio trend? Thank you. Okay. In 2020, 2021, at that time for EVs, our target is to have 30,000 stores, but our first target is 10,000 stores. That was achieved in 2020. In the process, definitely, there will be some issues. So in 2022-23, we wanted to constrain our capacity. So we first focused on our 10,000 stores. And then after 2023, we accelerated store opening. That happened in 2024 and 2025. After having 20,000 stores, then on this platform, we want to stabilize the operation. Next year, our target is not about store count or store opening. For the newly opened 10,000 stores, we want to enhance its efficiency. And for existing stores, we hope that they will do a better job. We will do better personnel training and improve our competitiveness. That is our overall strategy and direction. We won't change that. And for structure, we will look at our internal and external environment and see when to accelerate, when to decelerate. For this model, it starts overseas and we will replicate it. In overseas, I think it will be more difficult than in China. In Southeast Asia, Things are difficult in Thailand, Philippines. We did it fast. In some of the places, things may be much slower. Recently, I went to Bali. The capital has a population of 3 million. Well, the number is not as big as ours. Besides, we also have established our AIoT expansion strategy for our AIoT products. I think they are doing a good job. These are complementary. We have not reached the limit of our potential. There is still a lot of upside. And Alan can answer your question about expenses. I think there are two simple thoughts. First, R&D expenses increased. In terms of R&D expenses, its increase is bigger than revenue growth rate. That's the first most important factor. The second factor is mentioned by Mr. Liu. regarding new retail network. This month, or this quarter, on the quarter-on-quarter basis, we have an additional 1,000 stores, and among the 1,000 stores, 60 stores are big stores. So in terms of operation of these stores, it takes time for them to ramp up. So basically, there is increase in selling expenses mainly because of store opening. And the next thing is R&D expense increase. These are the two main factors. OK. Thank you, Mr. Lewin. Thank you, Alan. Thank you. Because of time, we will conclude our call here. Thank you for your time. I hope that you will continue to support Xiaomi Group. Thank you. Goodbye. Thank you all. Thank you.