On June 3, huami Technology (hereinafter referred to as “huami”) released its Q1 earnings this year. Founder Huang Wang said in the Q & a session of the conference call analyst that in the next few months, huami will release more than ten amazfit smart watches, and the price range will range from 299 yuan to 2000 yuan.
Eight days later, huami officially released two flagship new products, amazfit smart watch 2 and amazfit mobile health watch, in the field of intelligent call and health monitoring. Just recently, huami launched a new series of amazfit GTR watches, and the product update frequency is not fast.
As we all know, amazfit is a self owned brand promoted by huami. It is mainly used in smart watches and smart bracelets, and carries the important task of huami’s independence. Huami has held two press conferences to heavily store smart watches within 40 days. People with a clear eye can see that it is intended to improve the proportion of its own brand in the total revenue, gradually get rid of its dependence on Xiaomi, and at least present Xiaomi’s business Private brands keep pace.
In fact, the listing in February last year was an important turning point for huami to accelerate its de Xiaomi. Before that, it was very dependent on Xiaomi. In 2015, 2016 and the first three quarters of 2017, Xiaomi contributed 97.1%, 92.1% and 82.4% of huami’s total revenue respectively, becoming the most important customer and distribution channel of huami. Although huami will not compete with Xiaomi or other Xiaomi ecological chain enterprises, the proportion of its single major customer is too concentrated, and important affiliates such as major customers are important shareholders, so its independence is in doubt.
After that, huami vigorously supported its own brand, and amazfit smart watch and smart Bracelet became the most important product line outside Xiaomi bracelet. In August last year, Cui Dawei, CFO of huami, said at the Q2 financial report telephone communication meeting in 2018 that the proportion of private brands in annual revenue will be stable at 40% to 50% in the future, and huami really did it. It’s not too much to describe it as “rapid progress”.
According to the Q1 financial report of this year, the shipments of huami smart watches ranked fifth in the world in the quarter, and the private brand products and other products showed strong growth. The business revenue increased by 62% year-on-year, accounting for 41.3% of the total revenue in the quarter. It is not difficult to see that huami has found a winning way to switch from the bracelet to the watch track, build amazfit into a revenue pillar comparable to Xiaomi bracelet, and its leading position in the global wearable device market is becoming more and more stable.
Although the performance of huami’s own brand is eye-catching, and its shipments and revenue are rising, I still have to pour cold water on huami, which does not mean that it has successfully got rid of its dependence on Xiaomi. Its independence still has a long way to go for three reasons:
1、 Huami’s share price is affected by Xiaomi factors. Before its listing, huami had a valuation of US $1 billion, the latest share price was US $10.28, and the market value was only US $630 million, which was shocking. The downturn in its market value was not only related to poor performance, but also significantly decreased its revenue, profit and shipment in Q1 compared with Q4 in 2018. More importantly, investors expressed concern about the slowdown in revenue growth caused by the adjustment of revenue structure.
According to the data, the revenue of huami in 2016 and 2018 increased by 73.6% and 77.9% year-on-year, while the revenue of Q1 in 2019 increased by only 36.5% year-on-year, and the revenue of Q2 is predicted to increase by about 30.2% to 32.9% year-on-year. Successive stalls occurred after huami vigorously developed its own brand. In my opinion, the shipment volume of huami dropped from 9.2 million units in Q4 in 2018 to 5.6 million units in Q1 in 2019. In addition to the seasonal factors of the Spring Festival and the market downturn, it is also related to its own business adjustment, that is, weakening the “sales responsibility” of Xiaomi Bracelet and heavy position potential stock amazfit. However, this will make investors feel uncomfortable, Because Xiaomi is the sea god needle for the stock price of huami listed under the aura of Xiaomi ecological chain enterprise.
2、 Huami cannot refuse Xiaomi brands and channels. Whether in the past, now or in the future, huami and Xiaomi can only love each other, not kill each other. Huami once disclosed the enterprise and industry related risks in the prospectus, and its relationship with Xiaomi ranked first. “Xiaomi is our most important customer and distribution channel. Any deterioration in our relationship with Xiaomi or any reduction in the sales of Xiaomi wearable products may have a substantial negative impact on our operating results.” Millet’s influence and importance can be seen.
In fact, Xiaomi provides strong support for huami in terms of brand and channel, which is a high-quality resource that it can neither refuse nor refuse. On the one hand, Xiaomi’s Xiaomi home, which Xiaomi is making great efforts to layout, can extend huami’s products from the limited online market to a broader offline market, saving costs and increasing sales; On the other hand, although huami has built its own online channels outside Xiaomi mall, its performance in platforms such as jd.com and tmall is mediocre, not to mention expanding unfamiliar offline markets. Once it leaves the introduction of Xiaomi’s online and offline resources, amazfit may become a passer-by.
3、 Wearable devices are just accessories of mobile phones. Unlike the voice control of hot smart speakers, wearable devices such as watches and bracelets are inseparable from the control center of mobile phones. They are more like accessories of mobile phones. Data synchronization such as heart rate, exercise and weight all depend on mobile phones, so as to not only facilitate users to obtain relevant information, but also expand business application prospects based on big data. In other words, if you do not interact through mobile phones, bracelets and bracelets are not useless, but they basically lose imagination space.
Since opening up the “Mijia” brand for Xiaomi’s ecological chain products, Xiaomi has been cautious about naming the “Xiaomi” brand for ecological chain products. At present, only a few products such as mobile power supply, bracelet and water purifier enjoy this honor. Huami is one of them, and its “Xiaomi sports” is the official app of Xiaomi wearable device. If de Xiaomi really takes a substantive step, Xiaomi sports may be recovered by Xiaomi, and it may not be difficult for huami to re develop an app to replace Xiaomi sports. The difficulty is to migrate users intact and maintain steady growth.
It is worth noting that although huami occupies a pivotal position in the wearable device market, it is far from being at ease. On the contrary, the market competition is becoming more and more fierce. In particular, players such as Huawei, apple, Samsung and 360 continue to make great efforts and make rapid progress, gradually posing a threat to huami to a certain extent. In order to consolidate its leading edge, the weak huami has to hold on to Xiaomi’s thigh and seize the market with the help of Xiaomi’s high-quality resources, rather than trying to be independent, otherwise it is likely to be caught up by the above strong enemies.
Therefore, huami is simply unable to promote substantive de Xiaomi, and at most increase the proportion of private brand revenue, because the gross profit margin of self-owned brand products is higher than that of Xiaomi products, but it is difficult to exceed 50% in the short term. Even if it exceeds 50%, it does not mean that it is truly independent. You know, as an important shareholder and customer of huami, Xiaomi will still exert influence on huami for a long time. As it continues to enjoy the development dividends brought by Xiaomi, it will have no courage and ability to get out of the comfort zone.
In fact, huami’s current dilemma is an epitome of Xiaomi’s ecological chain enterprises. They enjoy Xiaomi’s all-round protection in the process of development and growth. When they develop to a certain scale, they actively seek independence, but they find it difficult to completely get rid of their dependence on Xiaomi, just like the monkey king can’t turn out the palm of Tathagata Buddha’s hand. On the one hand, Xiaomi’s resources are indeed attractive, especially the channel and supply chain; On the other hand, they are worried that they will face off with Xiaomi after tearing their faces, and Xiaomi who ends up in person has the ability to lie down.
Perhaps, “love and hate” and “involuntarily” are the true portrayal of Huang Wang’s heart. Huami is still an ecological chain enterprise closely related to Xiaomi. Even if it is listed, it does not mean that it has the ability to fly alone from Xiaomi.