Xiaomi Sees Q1 Sales Hit Over Coronavirus, Believes Demand Will Bounce Back

Chinese smartphone maker Xiaomi expects a hit to first-quarter sales from the disruption caused by the coronavirus outbreak, but believes demand will bounce back in the second and third quarters, its CEO said on Thursday.

Lei Jun made the comments during a launch event for Xiaomi's new Mi 10 flagship line of smartphones, which was live-streamed due to nationwide restrictions on travel and large gatherings.

"This year's first quarter smartphone sales will face an impact, but we believe that in the second and third quarters they will strike back," Lei said of the coronavirus impact.

During an online Q&A session, Lei said that while the company's capacity and stock was sufficient, deliveries in the coming two weeks might be affected as many factories in China could not resume work until February 10.

"We hope our Mi fans can understand, and that people won't scold us," he said.

Lei added that managing Xiaomi's supply chain was the toughest task facing the company at the moment, and staff were talking to suppliers every day.

At the start of the livestreamed event, Lei, a native of Hubei province where the virus broke out, donned a face mask to show support for effort to combat the health crisis.

"I'm from Hubei and spent four years in Wuhan in college, so my feelings for Wuhan are quite deep," he said.

"I believe Wuhan is a glorious city, and I believe even more that the brave and optimistic people of Wuhan can definitely fight this virus."

In December, Xiaomi opened a second headquarters in Wuhan, which currently has about 2,000 employees.

Factories and suppliers across much of China have suspended production as the country battles the virus. Though travel restrictions have been eased in some areas this week, migrant workers are reportedly having trouble getting back to their jobs and many stores and shopping malls are empty or closed.

Industry analysts expect the virus will cause smartphone shipments in mainland China to drop roughly 40 percent in the first quarter compared with the same period a year ago.

Xiaomi and domestic rivals, which include Huawei Technologies Co, Oppo, and Vivo, had been hoping to boost sales in 2020 with the release of more 5G-enabled phones compatible with the country's newly upgraded telecommunications infrastructure.

The company said in a stock exchange filing earlier on Thursday it expected 2019 revenue to have topped CNY 200 billion ($29 billion), up from CNY 175 billion the previous year.

© Thomson Reuters 2020