Welcome to Xiaomi 2022 third quarter results announcement conference call. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. If you have any questions you would like to raise during the Q&A section later, please press star one on your telephone keypad to register your questions. Should you wish to cancel your questions, please press star two. I'd now like to hand the conference over to your host today, Ms. Anita Chan, Head of Investor Relations and Capital Markets. Please go ahead, madam.
Good evening, ladies and gentlemen. Welcome to the investor conference call hosted by Xiaomi Corporation regarding the company's 2022 third quarter results. Before we start the call, we would like to remind you that the call may include forward-looking statements, which are underlined by a number of risks and uncertainties, and may not realize in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, the company's financial prepared in accordance with IFRS. Joining us on the call today are Mr. Wang Xiang, Partner and the President of Xiaomi Corporation, and Mr. Alain Lam, Vice President and the Chief Financial Officer of Xiaomi Corporation, and Chairman of Airstar Digital Technology.
To start, Mr. Wang will share recent strategic updates of the company. Thereafter, Mr. Lam will review the business and financial performance for the third quarter of 2022. Following that, we will move on to the Q&A session. I will now turn the call over to Mr. Wang.
Thank you. Thank you, Anita. Good evening, everyone. Thank you for joining our third quarter earnings call. Since 2022, our whole industry faced many challenges, including rising global inflation, foreign exchange fluctuation, a complex geopolitical environment, and the COVID resurgences in Mainland China. These challenges have not changed materially in the third quarter of 2022, and have continued to impact overall market demand significantly. The global smartphone market declined nearly 10% year-over-year in the first three quarters of this year. In this quarter, global smartphone shipment hit the lowest point compared to the third quarter over the past nine years. Despite the challenging environment, due to our global scale, our long operating histories in global markets, and our brand and the channel advantages, our business remained resilient. In the third quarter, our total revenue adjust...
Our total revenue, adjusted net profit, smartphone shipments, and the smartphone margin all achieved growth quarter-over-quarter. More so than any other time, in times of difficult, it is vital to invest in our long-term capabilities to lay the foundation for high-quality, sustainable growth. With this in mind, we continue to advance our business strategies and strengthen our foundation. Our third quarter total revenue reached RMB 70.5 billion, with smartphone revenue reaching RMB 42.5 billion, IoT and lifestyle products revenue of RMB 19.1 billion, and the internet services revenue of RMB 7.1 billion. Meanwhile, we have been actively investing in advancing our S mart EV and other new initiatives. Our adjusted net profit reached RMB 2.1 billion in the third quarter of 2022, which included RMB 829 million of the expenses related to Smart EV and other new initiatives.
In the complex and ever-changing overseas market, we cooperate openly with our global partners, leveraging our global scale to mitigate single market risks. In the third quarter, we maintained our number three position in global smartphone shipments with market share of 14%. In Europe, we rank number two, with market share growing year-over-year and quarter-over-quarter to 23%. In this quarter, more than 75% of our smartphone ship to overseas market. Our smartphone market share ranked top three in 52 markets, and among the top five in 64 markets. We further strengthen our position in the premium smartphone market, and our newly launched premium smartphones have been very popular. Xiaomi 12S Series and the Xiaomi Mix Fold 2 received over 98% and 99% positive ratings respectively on JD.com.
In this quarter, in mainland China, our smartphone market share in RMB 4,000-RMB 5,000 price segments grew year-over-year of 5 percentage points and year-over-year of 2 percentage points in RMB 6,000 and above, demonstrating the competitiveness of our premium products. We continue to invest in R&D and strengthen our long-term core competitiveness. In the third quarter, our R&D expenses reached RMB 4.1 billion, an increase of 26% year-over-year, among over 30,000 employees at Xiaomi, nearly half are R&D personnel. In terms of Smart EV and other new initiatives, we have invested over RMB 1.8 billion in the past three quarters. Our Smart EV business is advancing smoothly and has established a R&D team of more than 1,800 professionals.
We believe the global total addressable market for Smart EV exceeds trillions of dollars, while the current market is still very fragmented and very early in its development, leaving plenty of room for us. We have been actively promoting sustainable corporation development. In August 2022, Forbes China released its first China ESG 50 report to recognize companies that follow best practices in ESG and it lists Xiaomi on its China ESG 50 list. In October 2022, Xiaomi was selected into Forbes World's Best Employers list for the second consecutive year. In addition, we participated in education equality initiatives in Malaysia, Thailand, Vietnam, and Singapore, providing digital education equipment to local students. We believe it is necessary for us to spread ahead social responsibilities, even against macroeconomic headwinds.
In the coming new year, despite the challenges at home and abroad, we remain confident in our ability to seek certainty in times of uncertainty. Thanks to our relentless investment in our core capabilities, our global scale advantage, and our strong cash resources. More importantly, we will remain agile and strategically balanced profitability and scale while improving operating efficiency. Meanwhile, we will commit to investing in R&D and the long-term driving forces to lay the foundation for healthy and high-quality, sustainable growth. Together with all of you, we will forge ahead of against the headwinds, to weather every season, as no winter lasts forever and no spring skips its turn. With that, I will hand it over to our CFO, Alain, to discuss our third quarter results in greater details. Alain, please.
Thank you, Xiang. Good evening, everyone. Let me go into more details of our third quarter performance. As Xiang mentioned, in the third quarter, our performance remained resilient despite the ongoing macroeconomic headwinds. Our revenue reached RMB 70.5 billion, and adjusted net profit was RMB 2.1 billion this quarter, which included expenses of RMB 829 million for Smart EV and other new initiatives. Our revenue as well as our adjusted net profit both increased quarter-over-quarter. Our three business segments remained healthy. We ranked number three in terms of global smartphone shipments. The number of connected devices on our AIOT platform increased by more than 40% year-over-year, and the number of our MIUI MAU again hit record highs, reaching 564 million globally and 141 million in mainland China.
In the third quarter, our global smartphone shipment achieved market share of 13.6%, and our smartphone shipment has increased sequentially over the past two quarters. We have continued to steadfastly execute our smartphone premiumization strategy, and our newly launched smartphone models have earned widespread positive reviews. In the third quarter in mainland China, our premium smartphone shipments increased 14% year-over-year, and our smartphone ASP increased 9% year-over-year. Xiaomi 12S Ultra, which was launched in July, and Xiaomi Mix Fold 2, which was launched in August, generated over 98% and 99% positive ratings, respectively, from JD.com.
During the Double 11 shopping festival, our cumulative paid GMV from all sales channels exceeded RMB 17 billion. We ranked number one among Android smartphones in terms of both sales volume as well as sales value on each of the major platforms, including Tmall, JD, Pinduoduo and Douyin. In the AIOT categories, we achieved 147 number one rankings by sales volume or sales value on Tmall and JD. We also continued to make steady progress in our offline retail business despite the continued COVID-19 outbreaks, which caused the temporary closures of many of our stores during this quarter. Our retail store GMV increased by 12% year-over-year during the festival, which included RMB 190 million GMV from our integrated online to offline business.
Our integrated online to offline business includes on-demand delivery and in-store pickups from our offline stores based on orders placed online. We continue to increase our R&D investment to strengthen our cross-core competitiveness. In the third quarter, R&D expenses reached RMB 4.1 billion, increasing 26% year-over-year, and the number of granted patents to us exceeded 29,000 globally. We continue to invest in our technology talent, and the proportion of R&D personnel to total employees increased to 48%. Boston Consulting Group named Xiaomi as one among the 50 most innovative companies of 2022. Let's dive deeper into each segment, starting with smartphones. Ongoing macroeconomic headwinds continue to affect overall smartphone industry demand. This quarter, global smartphone shipment was the lowest third quarter shipment since 2014.
Against this challenging backdrop, our global smartphone shipment increased by 2.8% quarter-over-quarter to 40.2 million units, achieving a second consecutive quarter of sequential growth. Our smartphone revenue reached RMB 42.5 billion. We are committed to bringing cutting-edge technologies to the mass market at affordable prices. In October, we launched the Redmi Note 12 series. Orders exceeded 350,000 units within the first hour of launch. Within this series, the Redmi Note 12 Discovery Edition is equipped with a 200-megapixel camera and a proprietary 210W HyperCharge solution that can fully charge the smartphone in only nine minutes, further demonstrating our pioneering technology. We also launched Xiaomi Civi 2 with lightweight and attractive design.
It is our first smartphone equipped with dual ultra-high definition front cameras, which enhance self-portraits and videos with natural realism and depth of field. We continue to advance our overseas businesses and maintain leading positions in major global markets. In the third quarter of 2022, our smartphone shipment ranks among the top three in 52 markets and among the top five in 64 markets. In this quarter, our market share improved year-over-year in Europe, the Middle East, and Latin America. In Europe, we ranked two, with market share increasing 1.8 percentage point year-over-year to 23.3%. In the Middle East, we ranked two with 17.6% market share, an increase of 1.3 percentage point year-over-year. In the emerging markets, we ranked three in both Latin America and Africa.
Our global scale and competitive products have attracted more overseas carriers to partner with us. We continue to deepen our relationships with existing carrier partners. In this quarter, our carrier channel market share in Europe increased by 1.7 percentage point year-over-year to 19.9%. Our carrier channel market share in Latin America increased by 1.5 percentage point year-over-year to 16%. Our smartphone market share through carrier channels ranked top three in 38 overseas markets. Let's look at the IoT business. Connected users and devices on our leading consumer AIoT platform continued to grow. As of September 30th, the number of connected devices on our AIoT platform reached 558.3 million, up 40% year-over-year.
The number of users with five or more connected AIoT devices reached 10.9 million, up over 35% year-over-year. In September, MAU of our AI assistant grew 9% year-over-year, and MAU of our Mi Home app grew over 20% year-over-year. In this quarter, revenue from our AIoT business decreased 3.8% quarter-over-quarter to reach RMB 19.1 billion, primarily due to decrease in revenues from AIoT products such as air conditioners, partially offset by increase in revenue of smart TVs and laptops. Our smart TV business continued to maintain a leading position globally. In the third quarter, global shipments of our smart TV grew year-over-year to reach 3.3 million units against an overall industry decline. We maintained our top five global ranking and overseas smart TV shipment achieved a quarterly high.
Overseas shipments excluding India grew over 40% year-over-year. Our smart home appliance business achieved robust growth in the third quarter of 2022, with revenue growing more than 70% year-over-year to achieve another record high. Our air conditioner shipments exceeded 1 million units, increasing over 70% year-over-year. Our refrigerator shipment exceeded 340,000 units, an increase of over 150% year-over-year, achieving a record high. In October, we launched our first Redmi Pad product with a low blue light eye protection display, offering a comfortable viewing experience. During the same month, we launched Xiaomi Book Air 13, our first laptop with a screen that can be flipped 360 degrees to meet our users' needs in multiple settings. We continue to maintain our lead in wearable products.
In the third quarter, our TWS earbuds shipments ranked number three and our wearable bands ranked number two in mainland China. We have been enhancing the connectivity between our wearable products and smartphones, which has made our premium wearable products more appealing and more competitive. In August, we launched our premium Xiaomi Buds 4 Pro and our premium Xiaomi Watch S1 Pro. Among the connected users of these two products, over 50% are users of our premium smartphones. We continue to explore new blockbuster AIOT products. In September, we launched two energy-related IoT products. First, the Mijia Outdoor Power Supply 1000 Pro, which is equipped with a 1 kWh capacity and 1.8 kWh , 1 kW, 1.8 kW high power output, satisfying the power needs of outdoor activities and home emergency uses.
We launched the Mijia Solar Panel 100W, which efficiently captures solar power in a foldable, portable design and is water and dust proof. Let's look at internet services. In this quarter, our global MAU reached 564 million, an increase of 78 million year-over-year. In mainland China, MAU reached 141 million, an increase of 14 million year-over-year. Our global TV MAU exceeded 54 million. All three metrics achieved record highs. In the third quarter, our internet services revenue remained stable and reached RMB 7.1 billion , an increase of 1.4% quarter-over-quarter. Macroeconomic and industry specific headwinds presented challenges, our global advertising and gaming revenues still achieved quarter-over-quarter growth. This year our gaming business has achieved three consecutive quarters of year-over-year growth.
As our overseas user base continues to expand, our overseas internet services revenue achieved another quarterly high of RMB 1.7 billion, up 17.2% year-over-year, and accounted for a record high 24.2% of our total internet services revenue. Benefiting from diversified monetization channels, our advertising business in mainland China and overseas both achieved quarter-over-quarter growth. In mainland China, revenue of brand and performance-based ads increased, driven by a more diversified advertiser base and higher monetization efficiency. Overseas, our performance-based advertising revenue and pre-installation revenue both again hit record highs, driven by deeper collaborations with global partners and strong content operators. In the third quarter, our mainland China TV internet services revenue reached another quarterly high and accounted for 15% of mainland China internet services revenue.
As we further expanded our content offerings, our TV paid subscriber exceeded 5 million, providing an additional source of recurring revenue for our smart TV business. Let's move on to more detailed financials. In the third quarter, total revenue was RMB 70.5 billion, as mentioned before, and 50.5% came from overseas overall. Smartphone revenue was RMB 42.5 billion. IoT revenue was RMB 19.1 billion, and internet services revenue was RMB 7.1 billion. In the third quarter of 2022, overall gross margin reached 16.6%. Smartphone gross margin increased quarter-over-quarter to 8.9%, mainly due to improvement in gross profit margin in mainland China. IoT gross margin increased quarter...
IoT gross margin decreased quarter-over-quarter to 13.5%, mainly due to enhanced promotional efforts of our smart TVs overseas, as well as increased impairment provisions on our inventory. Internet services gross margin decreased quarter-over-quarter, mainly due to decline in gross profit margin of our fintech business and higher revenue contribution from our gaming business. In this quarter, our operating expense ratio decreased 0.3 percentage points quarter-over-quarter to 14.5%, mainly due to reduced promotional activities. Excluding EV and other new initiative expenses, our operating expense ratio would have been 13.3% in the third quarter, a decrease of 0.7 percentage points compared to the previous quarter. As we continue to increase our R&D investments, R&D expense ratio reached 5.8% this quarter.
In the past year, we have made progress in managing our expenses. Our total operating expenses this quarter reached RMB 10.2 billion. The supply situation has normalized that maintain our raw material inventory at a healthy level. Furthermore, as we continue to reduce our some growth potential and ESG initiatives. We have been actively promoting sustainable corporate development. In August, Xiaomi was selected to Forbes China's first ever China ESG 50 list, which recognizes our efforts in ESG. In October, Xiaomi was named as one of Forbes World's Best Employers for the second consecutive quarter, demonstrating strong endorsement of our practices in talent development as well as social responsibility. We have been actively promoting public welfare initiatives. We responded rapidly to recent natural disasters and made donations to support those in need.
We have been promoting education equality initiatives in countries such as Malaysia, Thailand, Vietnam, as well as Singapore. This concludes our re-prepared remarks. Let's open the call up for questions from investors.
Thank you, Alain. We will now proceed to the Q&A session. Please ask no more than one question at a time so that we could allow more investors to ask their questions. Meanwhile, we'll state your question in Mandarin followed by English recap. Thanks.
Thank you. The question and answer section is now open. To register your questions, please press star one on your telephone keypad. Should you wish to cancel your question, please press star two. Our first question is come from Andy Meng with Morgan Stanley. Andy, please go ahead.
Xiaomi has started smartphone inventory destocking since the second quarter of this year. Could you share with us the latest progress of destocking and inventory balance in China and other key overseas markets, including India and Europe? Based on latest observation, what's the smartphone demand outlook in the fourth quarter, and how does the latest industry dynamics affect your growth margin profile in the coming quarter? Thank you very much.
Thank you, Andy. I think if you look at the numbers, I think we are making good progress in decrease our inventory level. The level decreased by 9% year-over-year and quarter-over-quarter.
I think is a good, very good signal. Regarding to, would take how long to get to the normal level, I think we will continue to utilize the promotion season like in Q4 to clear the inventory. We think our inventory level right now is in progress. I think probably end of this year or maybe the first beginning of next year, we'll get to the normal level. We are working very hard on that.
By the way, the inventory actually is, I think is not, it's, I think it's a lot of inventory is on the, is, it's not bad inventory. Actually we're confident that we can clear them out. Takes a little while.
I think to answer to supplement the answer from Xiang, Andy. As you can see from our reported inventory levels, the raw material inventory has stayed at a relatively healthy level. It has increased slightly this quarter because we have to stock up on some of the new SoCs for our product in the second half of the year. That's the raw material part. Overall, we think that it is at a pretty healthy level. On the finished goods side, I think as we mentioned last quarter, after the 618 event, our inventory in China has largely been normalized, and that hasn't changed this quarter.
India after Diwali has become, has gone down to a pretty healthy level, although I think it might take another quarter or so for that to be cleared. In the overseas market, I think it's what Xiang was saying, as it will be our major focus for this upcoming quarter, as there are several large promotional events that is happening in the international market this quarter. As such, I think that we are on the right track. As you can see, our finished goods has come down significantly between in the last couple of quarters, as part of our efforts.
In terms of gross margin, our Q3 gross margin has increased from our Q2 gross margin, partly due to the fact that the premium products that we launched in China in Q3 carried pretty healthy margins. As such, I think that that has helped our gross margin overall. In terms of how we look at Q4, we hope that our gross margin will continue to improve. I think, you know, as we work through our inventory level, and as we have less impact of provisions of our existing inventory, we think that our gross margin on our smartphone business will get back to a much more healthier level in Q4.
Got it. Very helpful. Thank you very much, Wang Xiang and Alain Lam.
Thank you.
Thank you, Andy.
Thank you. Our next question is come from Timothy Zhao with Goldman Sachs. Timothy, please go ahead.
Hi, Wang Xiang, Alain Lam. Thank you management for taking my question. My question will be about the overseas market, which appears to be a growth drag across the smartphone and IoT business lines. Also if you look at the Internet services revenue, overseas markets also show a sequential slowdown compared to the first and second quarter this year. Could management share some outlook on how we should look at the growth for the overseas market across different business lines? Specifically for the IoT market, what is the regional breakdown? Thank you.
Yeah. Thank you, Timothy. I think, we are in some of the global market like Europe, we are growing our market share. Right now the in Euro-European market, we are 23%, even with the micro economic downturns. We think we'll, we will, we try to maintain our growth there. Also, the Latin America, we also see the positive trend. In overall, although the global smartphone shipment d rop about 10%. Because of our scale, I think we will find the growth area, continue to put our resources there to grow our business there. Yeah. Alain, probably you can.
Yeah. Look, I think, Timothy, I'll get to the internet first, and then I'll get to the IoT after, right? On the internet side, I think, you know, it's no denying that overall the global ad market has also been not in a particularly robust state, robust form this year, right? I think if you look at the global advertising market, it hasn't been growing that much for this year. I think despite that, I think given that our users have continued to grow, we have managed to increase our revenue year-over-year, as well as quarter-over-quarter.
I think that that's something that, I think it's the overall market that has slowed down, that has caused our internet market, internet services revenues to slow down. Given our user growth is still quite healthy, I think we've been able to outperform the market. I think that that's the first one. On the IoT side, I mean, obviously, we are certainly hurt by the macroeconomic impact that has impacted the global economy, right? Especially in Europe, right? I think that the inflation, the Forex, fluctuations, et cetera, has means that the Europe, European demand has softened quite significantly in the IoT market.
As a result, some of the categories like, you know, vacuum robot cleaner, like our scooters, have seen quite meaningful decline in terms of revenue. As such, I think that's something that we've been very closely monitoring the situations over there. Obviously, as Xiang mentioned in his opening remarks, we haven't seen that much significant changes in the third quarter. I think we need to, as a result, I think we need to focus on some of these major events that are coming up, Black Friday and Christmas, et cetera, to clear out some of our inventory in the channels, to prepare us for next year. Next year, we also look forward to kind of doing more product, introducing more SKUs to the international market.
Thank you. Our next question is come from Kyna Wong with Credit Suisse. Kyna, please go ahead.
Let me translate the question in English. I just wanted to ask, like, any directions or like expectation on the expenses for EV and other new initiatives in the fourth quarter and 2023. Because the original expectation to spend around like RMB 10 billion before the productions of EV. Is that still on track or is could be like something adjusted due to the macro situations? What should we expect on the next milestone for the EV status, given we know that the ADAS filter is actually ongoing? What should we expect in like coming few quarters time to time? Thank you.
Oh, thanks, Kyna. I think first of all, I think EV expenses will continue to ramp up, right? As we are getting closer to our launch, which we're still expecting in the first half of 2024. As we, as you can see in the past three reports, our expenses has ramped up gradually, and that we'll expect that to continue in Q4 of this year. I think that that's the, that's the overall. I think that that's the first question. As we continue to invest in our headcount as well as our, you know, CapEx, I think that we expect the expenses will continue to increase.
Right now our R&D team has already exceeded 1,800 people. We continue to increase the headcount in our EV business. In terms of the development, right now we haven't talked about the development, you know, in the public. Probably we'll say that to be still in stealth mode at this point. We have not talked about some of these developments in public. Hopefully you understand. I think we try to stay in a low profile on our EV side.
I think the two things is we continue to expect our first car to be mass produced in 2024, first half, and then second is, our number of employees have exceeded 1,800 people.
Yeah. Got you. Thanks. I just wanted to check if there are any update. Yeah. Yeah, we understood. Thank you.
Thank you. Our next question is come from Zoe Xu with UBS. Zoe Xu, please go ahead. Sorry, Zoe Xu, please go ahead for your questions.
Oh, sorry. Can you hear me now? Hello?
Yes, please.
Hi. Yes. Sorry. Yeah, I think most of my questions were answered earlier, but still want to double check whether you'll be able to share any considerations regarding the manufacturing side of the EV business, whether it would be internal or external. Any colors will be very helpful. Thank you.
I mean, we don't have any particular update at this point. I think obviously we are considering different alternatives, and we are considering all the possible alternatives. It's not, you know, it's still under consideration at this point.
Sure. Thank you.
Thank you. Our next question is come from Wang Yany un with CITIC Securities. Please go ahead.
In the third quarter, the gross profit margin of smartphone dropped or not, and there's no significant improvement quarter-on-quarter. What are the main pushing factors? How about the trend of the first quarter? Thank you.
Yeah. I think there are a couple of factors, right? Number one is obviously last year, we're still enjoying a global supply constraint, right? As a result, I think that our mobile and our smartphone shipment as well as our smartphone gross margin, we were enjoying, you know, pretty healthy growth as well as margin. I mean, this year, the situation has obviously changed quite dramatically. I think that the overall year-over-year, there's not a decline, I think, for that reason. In terms of quarter-over-quarter, I think that, you know, if I look at the three regions, three major areas, right? Number one is our China.
Our China business, if you look at the gross margin, it has gone to a pretty healthy level, given that we have launched some of our premium products over in China. As you said, there have not been as much promotional events in the first quarter as compared to the second quarter. I mean, that's the first one. Second area is India. Obviously India, first quarter is Diwali, right? As we're preparing for Diwali, as we are launching into Diwali, the gross margin in India in the first quarter tends to be much lower than the second quarter because of the as well as the fact that we are trying to clean up our inventory, some of the inventory in India.
As a result, I think quarter-over-quarter, we've seen a decline in terms of gross margin. Overseas market, I think it continues to remain healthy despite the fact that we've been trying to also make a big effort in terms of clearing our inventory over there. The overseas market, excluding India, remains reasonably healthy. Again, there was some degradation compared to last year, given that we've been trying to clean up our inventory, as well as the fact that there's some degradation probably over the last quarter, again, because we are making a more enhanced effort to.
Clean up our inventory. As a result, I think overall you get the result of China better, you know, much better, India, little bit worse, and then overseas kind of flat to a bit worse-ish, right? To get to that level of quarter-over-quarter comparison. Does that make sense?
Thank you. Our next question is come from [audio distortion] with CICC. [audio distortion] , please go ahead.
Hey. We see that revenue of smart large home appliance increased over 17% year-over-year, which is much higher than the 25% growth rate in the first half of the year. Could management share the reason for this strong growth? What is your long-term development strategy for this category? Thanks.
Thank you for the question. Actually, for the air conditioner, actually, we have a very good product, but also we thank to the weather. Actually, we ship lot of air conditioners to the market because of the weather and the very good product. And others, we are also working very hard to make up the find the best setting features in our refrigerator and the washers. They are also doing good as a start. Actually, the good progress for us is our Mi Home, actually offline channels actually sell a lot of big appliances, white product through our offline channels.
This is also a very good signal, so that we can sell not only smartphones, wearables, but also bigger appliances in our offline channel. We are using the platform, the internet platforms, online platforms, to combine the online platforms with our offline stores. That's also helped to drive the revenue growth for the bigger appliances.
Thank you.
One of the key things as Xiang mentioned is obviously the weather in China was extremely hot in the third quarter. As a result, our air conditioners, despite dropping, volume dropping, shipment dropping Q- over- Q, but it's still a massive increase from our last, from our Q3 of last year, because of the supply and the surge in demand due to the weather. At the same time, I think, we are getting more competitive in our products. Last year was obviously, we're still ramping up this business, as a result, I think you've seen a significant increase in our growth. Also, I think that in terms of strategy, I think we've been much more focused on premium products this year.
I think, if you look at our strategy going forward, we'll continue to focus on the premium segment of these, of these white goods products. You know, which means that, you know, we probably, you know, more focused on higher ASP products, and as a result, it'll also help our overall revenue as well as ASP as well.
Okay, thank you.
Thank you. Our next question is come from Lep ing Huang with Huatai Securities. Lep ing, please go ahead.
Okay. Thank you for taking my question. I have a question about the smartphone market outlook in 2023. I was quite surprised that Wang Xiang mentioned that the this last quarter was the worst quarter in last nine years in the smartphone market. What are the new feature we required to attract these consumer to buy the new phones? What are the opportunity and challenge for Xiaomi to achieve sustainable earning growth in this market? Thank you.
Yeah, thank you. Thank you for the question. Actually, it's very much related to the global market, the total size of the market. In the last quarter, actually, the global market dropped almost 10%. That's, that's why it's the lowest quarter in the past nine years. And also in China, actually, the total market dropped 11%, even worse. I think it will get back to the normal, but we still see a lot of uncertainties because of the global economy. Many, many factors to impact the total market, for example, the inflation, and also the U.S. versus other currencies.
We are very closely monitor the dynamic of the global trend. We remain confident because I think with our strategy, we are going to continue to invest in the mid and high-tier products. At the same time, we'll also continue to offer a lot of very, very competitive market for the global users, from the entry level to mid-level products. We are prepared for the recovery. We remain confident on that. We just need to closely monitor the dynamic. Another area we can see is.
Yeah, go on.
The Q3, if you compare Q1, Q2 to Q3, you can see our shipment steadily grow quarter-over-quarter. Although the growth rate is not very high, but you see the resilience of our market.
So wha-
Yeah.
What will be the normal level of smartphone shipment globally based on your experience then? Is a very abnormal level or because of the macro environmental?
Yeah. I think that the it dropped 10%, right? If you wanna get normal, you have to grow 10% from current level, and then steadily get to the normal. We still in a lot of uncertainties. We don't know when we can see the recovery, but we're seeing that how to say? The rate of declining is kind of stabilized.
Okay. Thank you. Thank you, Alain. Very clear.
Thank you. Our next question is come from Gokul Hariharan with JP Morgan and Co . Please go ahead.
Yeah. Thanks for taking my question. My question is slightly similar to what Leping asked. For China smartphone, if we look at the numbers this year, we are running at about 270 million-280 million units. Overall install base is 1.3 billion-1.4 billion users. Roughly we are running at something like a five-year replacement cycle, which we have never really seen in the past. Could you talk a little bit about what is your expectation for what is a steady state number for China smartphones? When do you expect a bit of a recovery? Like, what are you penciling in for 2023 for China smartphones? Do you expect some recovery next year, or you think that it's still going to be relatively muted compared to 2022? Thank you.
I think, Gokul, I think to answer your question, I think, Xiang actually asked, answered very similar question, just now. We.
No, I'm talking very specific to China, to be honest.
Right. Your question is China or your question is overall?
Yeah, specific to China.
Sorry.
Specific to China. Because the replacement cycle in China at least numerically look extremely long, 4.5 years-5 years, which I think we have never seen in any market. just wanted to understand your perspective on this.
Look, you know, I think that, we think that this year... We think that next year, right, will roughly be the same as this year, I think at best. I'm not sure that, you know, the 1.3, 1.4, I think that's something that we need to verify that. Obviously, from an overall macro perspective, we expect that next year, we'll probably stay at a similar level. One thing is obviously the development of a secondhand market in China. Some people are buying secondhand phones in China. The second one is obviously the extending lifecycle of each phone.
I mean, I've seen some survey recently that suggest that it's probably two to three years as opposed to four to five. I think against this macro environment, we continue to stay relatively conservative in terms of our overall in terms of estimating the overall size of the market for next year. Based on, yeah, based on the third party company [DCI 's] data, actually, the life cycle for a smartphone right now in 2022 is 27 months compared to 22 months in 2017. That's their.
Okay.
Their data.
Okay. That's helpful. Thank you.
Thank you. We'll now invite the last question, and the last question is come from Kuai Jian with Orient Securities. Please go ahead.
Hi, currently, our retail channel is facing pandemic challenges. If the pandemic is over next year, what will be the positive impacts to the sales of premium phones and IoT products? Thank you.
I think if we can solve the pandemic issue, I think you will see a very positive effect. Right now, we have almost 2,000 stores staying closed. They closed because of the pandemic. Also right now, based on the latest data, actually half of our high-end smartphones are shipped from our offline channels. Right now we maintain about 10,000 stores. You see, we'll see a very good potential to grow our smartphone shipment if the pandemic is over for the year 2023.
Can we propose it will be related, highly related to the number of the stores? Like, currently we have 10,000, and if we increase the number to like, to 12,000, then can we expect something like 20%? Or, how do we quantify the number?
I think right now our strategy or plan is to optimize the store. Optimize the actually to improve the efficiency of each store, not just simply add the number of stores. We will do optimization for our geographic coverage and to focus on increasing the efficiency of each store. Of course, compared to our competitors, we have much less stores in China, but we still believe we should. There is a big room for us to improve our efficiency of each store. That's the focus for us right now.
Okay. Got it. Thank you, Xiang .
Thank you.
Thank you.
Yeah. Thank you. This concludes today's conference call, and thanks again for joining us. You may now disconnect.
Thank you very much.
Thank you.