Welcome to Xiaomi 2022 Interim Results Announcement Conference Call. Today's conference is being recorded. If you have any objection, you may now disconnect at this time. If you have any questions you would like to raise during the question and answer section later, please press star one on your telephone keypad to register your questions. Should you wish to cancel your question, please press star two. I'd now like to hand over the conference to your host today, Ms. Anita Chen, Head of Investor Relations and Corporate Finance. Please go ahead, madam.
Good evening, ladies and gentlemen. Welcome to the investor conference call hosted by Xiaomi Corporation regarding the company's 2022 interim 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 that may not be realized in the future for various reasons. Information about the general market condition 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 financials prepared in accordance with IFRS. Joining us on the call today are Mr. Wang Xiang, Partner and President of Xiaomi Corporation, and Mr. Alain Lam, Vice President and Chief Financial Officer of Xiaomi Corporation, CEO 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 first half of 2022. Following that, we will move on to the Q&A session. I will now turn the call over to Mr. Wang.
Yeah. Thank you. Thank you, Anita. Nice meeting you here again. Thank you for joining our Q2 2022 earnings call. In this quarter, our industry has faced many challenges, including rising global inflation, foreign exchange fluctuations, complex geopolitical environment, COVID-19, resurgence in Mainland China, so on and so forth. These challenges significantly impact overall market demand and our financial results for the period. In the face of mounting pressure from both domestic and overseas markets, we remain focused on stabilizing our core business and leverage our global scale to mitigate risk in any single market more so than any other time. In times of difficulty, it is vital to strengthen our core capabilities and invest in R&D and technological innovation to enhance our long-term competitiveness. With this in mind, we continue to advance our business strategies and strengthen our foundation.
Our Q2 total revenue reached RMB 70.2 billion, with smartphone revenue reaching RMB 42.3 billion. IoT and lifestyle product revenue of RMB 19.8 billion and internet services revenue of RMB 7 billion. Meanwhile, we have been actively developing our smart EV and other new initiatives. Our adjusted net profit reached RMB 2.1 billion in the Q2 of 2022, which included RMB 611 million of expenses related to our smart EV and other new initiatives. In the complicated and ever-changing international market, our core advantage is our ability to mitigate risks in any single market with our global scale and footprint. In the Q2, we maintained our number three position in global smartphone shipments and continued to advance our market position quarter-over-quarter.
In the Q2, our smartphone market share grew quarter-over-quarter to 14% globally, 16% in Mainland China, and 22% in Europe. Meanwhile, our smartphone market share ranked top three in 55 markets and among the top five in 77 markets. We continue to attract new users through our increasingly popular new smartphones, both globally as well as in Mainland China. Our global MIUI MAU reached 547,000,000 in June 2022, and our Mainland China MIUI MAU increased for seven consecutive quarters, reaching 140,000,000 . It is worthwhile to note that our overseas internet services revenue increased by over 50% year-over-year, contributing nearly 24% of total internet services revenue in this quarter. This is a record high.
We continue to invest in R&D and strengthen our competitiveness with technology breakthroughs and deliver ultimate user experience. In the Q2, our R&D expenses reached RMB 3.8 billion, an increase of 23% year-over-year. Our R&D expenses are expected to reach RMB 17 billion this year and more than RMB 100 billion over the next five years. Spending from smartphones to wearable devices, from smart homes to smart manufacturing, from smart EV to bio robots, Xiaomi has been constantly exploring innovations in various technology settings to better connect people in the world and building an ever-evolving Xiaomi technology ecosphere. We make great progress on smart EV and other new initiatives. Last week, we officially announced that we will adopt our self-developed autonomous driving technology. We plan to invest in R&D of RMB 3.3 billion in phase I.
We have established a R&D team of more than 500 world-class professionals and plan to create a fleet of 140 test vehicles in phase I , aiming to become an industry leader in smart EV by 2024. Meanwhile, we introduced our first self-developed humanoid robot, CyberOne. Robotics is considered the crown jewel of manufacturing. With humanoid robots being the ultimate goal for many across the industry, this new breakthrough represents a milestone in our exploration of new technology frontiers. In August 2022, Xiaomi was named on the Fortune Global 500 for the fourth consecutive year and ranked 266, advancing 72 spots from last year. As a global company, we actively practice corporate social responsibility. In July 2022, Xiaomi was selected into Forbes China's 2022 Best Employers of the Year.
Meanwhile, we established Beijing Municipal Natural Science Foundation, Xiaomi Joint Innovation Fund, to support fundamental research in fields including AI, digital information, smart manufacturing. Furthermore, we customized the Redmi Note 11E for the elderly to bring convenience to their lives, bringing a more elder-friendly and accessible environment with our advanced technology. We believe it is necessary for us to bear the spirit of social responsibility even against macroeconomic headwinds. Faced with macroeconomic uncertainties and challenges, what we can do is to firmly execute our core business fundamentals, to strengthen our capabilities and to invest in technological innovation and self-improvement. We believe these will lay the foundation for our healthy and sustainable development over the long term. Together with all of you, our unwavering passion will help us discover opportunities and to find the silver lining behind the cloud as we make the world a better place. With that, I will hand it over to Alain to discuss our Q2 results in greater details. Alain, please.
Yeah. Thank you, Wang Xiang. Good evening, everyone. I'd like to walk you through more details of our Q2 performance. As Wang Xiang mentioned, this quarter we faced multiple challenges in our business, including continued macroeconomic headwinds, which caused global inflation to rise significantly, as well as extreme volatility in foreign exchange rates. In Mainland China, we have witnessed a resurgence in COVID-19, which caused significant disruptions to our offline business. Despite these challenges, we continue to focus on executing our core business strategies and strengthening our long-term competitiveness. In the Q2, our revenue reached RMB 70.2 billion, and adjusted net profit reached RMB 2.1 billion, which included expenses of RMB 611 million for smart EV and other new initiatives. Our three major business segments remain resilient despite the continued challenging macro environment.
We maintained our number three position in terms of global smartphone shipments. The number of connected devices on our AIoT platform increased more than 40% year-over-year. Our MIUI MAU reached 547,000,000 globally and 140,000,000 in Mainland China, both hitting record highs. Our brand continued to gain recognition worldwide. In August, we were named on the Fortune Global 500 list for the fourth consecutive year and ranked 266, up 72 spots from 2021. In the Q2 of 2022, global smartphone industry shipments dropped nearly 8% quarter-over-quarter. Despite this, our smartphone shipments still achieved quarter-over-quarter growth, and we have managed to increase our global market share for two consecutive quarters, from 12.5% in Q4 2021 to 13.8% in Q2 2022.
Our investments in premiumization strategy have resulted in increased market share in the premium smartphone market in Mainland China. In this quarter, according to two third-party data, our market share in the RMB 3,000-4,000 price segment in Mainland China increased 3.5 percentage point year-over-year to 18.2%. In the 4,000-5,000 price segment, our market share rose 2 percentage points year-over-year to 15.5%. We delivered strong results during the 618 shopping festival. Our cumulative paid GMV from all sales channels exceeded RMB 18.7 billion during this festival, and we ranked number one among Android smartphones in terms of both sales volume and sales value on JD.com, Tmall.com, and other platforms. Our IoT and lifestyle products also achieved remarkable results.
On JD.com and Tmall.com, we took 148 number one rankings across AIoT categories. Our new retail strategy in Mainland China has been making good progress. As of June 30, we had over 10,600 offline retail stores, and our offline smartphone market share in Mainland China increased to 8% this quarter. Our offline new retail strategy is highly complementary to our premiumization strategy. According to third-party data, in Mainland China, the proportion of our premium smartphone shipments sold through the offline channels increased over 5 percentage points year-over-year in this quarter. In addition, our offline stores have helped us cross-sell more IoT products. In this quarter, the proportion of our offline store GMV derived from IoT products increased over 11 percentage points year-over-year.
Due to improved efficiency, our average single store GMV in June rose more than 20% compared to December 2021. Next, I'll discuss our latest technologies in greater detail, some of which we debuted in our launch event last week. Technology advancement is our foundation, and we continue to push the frontiers in technological innovation. This year, we expect R&D expenses to reach RMB 17 billion, which represents a 40% compound annual growth rate from 2017, and we expect to invest over RMB 100 billion in the next five years. At the same time, we're building an ever-expanding technology ecosphere, spanning smartphones, wearable devices, smart home, smart manufacturing, smart EVs, and bionic robots to better connect people to the world around them and improve their lives.
In August, we launched our second-generation foldable smartphone, which we call Xiaomi MIX Fold 2, with a revolutionary ultra-slim and lightweight design. Xiaomi MIX Fold 2 features our self-developed micro water drop hinge and flexible ultra-thin glass, achieving width of 5.4 mm unfolded and a weight of 262 grams. It's one of the thinnest foldable smartphones in the market. Xiaomi MIX Fold 2 is also equipped with the Eco² OLED flexible display, which greatly increases light transmittance while reducing power consumption. Furthermore, it is also equipped with the Snapdragon 8+ Gen 1 processor, the Leica Summicron lenses, and the MIUI 13, which is designed specifically for foldable smartphones. We also launched our new premium wearable products alongside Xiaomi MIX Fold 2 last week.
Our new TWS earbud, the Xiaomi Buds 4 Pro, offer improvement in sound quality, noise cancellation, and dimensional audio, so that users can experience immersive lifelike sound. Our smartwatch, Xiaomi Watch S1 Pro, provides a truly luxurious experience with its exquisite appearance, full range of fitness mode, and multiple health functions. Both represent the highest priced TWS earbud and smartphone we have launched to date. In the smartphone category, we also vastly upgraded our products to bring healthier, smarter appliances to our users. Our large capacity Mijia dual drum washer dryer integrate many functions, such as separate and simultaneous washing and drying and bacteria and mite removal. Our Mijia purifying range hood uses advanced technology to capture smoke fumes and PM2.5 particles to protect air quality while cooking. All of these represent our application of innovative science and technology to home appliances.
Last week, we also provided an update on our latest autonomous driving technology. We plan to adopt a self-developed full stack approach, covering driving scenarios including highway, urban landscape, parking lot, and more. At present, our autonomous driving team has more than 500 employees, and we plan to invest RMB 3.3 billion in the first R&D phase, with the goal of becoming a first-tier player by 2024. We also launched our first full-size humanoid bionic robot, CyberOne last week, demonstrating our exploration of new cutting-edge technology. CyberOne is capable of bipedal motion balancing using mechanical joint motors and full-body control algorithms. Furthermore, it can detect human emotions and reconstruct 3D virtual environments of the real world using our self-developed audio and vision algorithms. Next, let us dive deeper into each segment, starting with smartphones.
In this quarter, macroeconomic headwinds as well as COVID-19 resurgence impacted overall smartphone demand. Global smartphone industry shipments declined 8% quarter-over-quarter. Against this challenging backdrop, we successfully increased our smartphone shipments by 1.5% quarter-over-quarter to reach 39,100,000 million units. Smartphone revenue reached RMB 42.3 billion. We announced our partnership with Leica in May, and in July, we launched the Xiaomi 12S series, our first smartphone series with an imaging system co-engineered with Leica. Xiaomi 12S Ultra is powered by the Snapdragon 8+ Gen 1 processor and two of our proprietary chips, the Surge G1 battery management chip and the Surge P1 charging chip, offering faster performances and lower power consumption. Xiaomi 12S Ultra also delivers a truly exceptional imaging experience.
It features Leica Summicron lenses and the extra-large Sony IMX989 one-inch image sensor, along with the Leica Authentic Look and the Leica Vibrant Look imaging profiles, pushing imaging technology to new heights. Its outstanding photography experience has won rave reviews, and all three models of our Xiaomi 12S series has achieved over 98% positive ratings on JD.com. We are committed to bringing cutting-edge technologies to the mass markets. In August, we launched Redmi K50 Ultra, which is equipped with a Snapdragon 8+ Gen 1 processor, a customized 1.5K display that balances image quality with battery life, and a 5000 mAh battery with support for 120-watt fast charging. Despite the challenging market and macro environment.
Despite the challenging macro environment and macroeconomic environment, we continue to advance our overseas business and maintain leading positions in major global markets. In this quarter, our market share improved quarter-over-quarter in Europe, in mainland China, in the Middle East, in Southeast Asia, Latin America and Africa. Furthermore, our ranking improved quarter-over-quarter in Europe, mainland China and the Middle East. As we mentioned before, our scale as well as our global operations help us mitigate volatility risks in any single market. According to Canalys, in the Q2 of 2022, we ranked top three in 55 markets and top five in 67 markets globally. We continue to strengthen our operations in the overseas carrier channel. In this quarter, our carrier channel market share in Europe increased by one percentage point quarter-over-quarter to 18%.
Our carrier channel market share in Latin America increased by 1.6 percentage points quarter-over-quarter to 19.3%. Furthermore, our smartphone market share through carrier channels ranked top three in 40 overseas markets. Now let's look at the IoT business. Performance of our AIoT business was resilient, benefiting from solid growth in mainland China. In the Q2, our IoT and lifestyle product revenue reached RMB 19.8 billion, up 1.7% quarter-over-quarter. As of June 30, the number of connected devices on our AIoT platform reached 527,000,000 , up over 40% year-over-year. The number of users with 5 or more connected AIoT devices exceeded 10,000,000 for the first time, up 37% year-over-year.
In June, MAU of our AI assistant reached 150,000,000 , up nearly 13% year-over-year. MAU of our Mi Home app reached 470,800,000 , up over 25% year-over-year. Let's go into more details on the key IoT categories. In the Q2, our global smart TV shipments achieved year-over-year growth to reach 2,600,000 units against an overall industry decline. We maintained our top five global ranking. In Mainland China as well as India, we were able to maintain our number one position. Our smart white goods business is growing steadily and making good progress in the premium markets. In this quarter, revenue of our white goods business grew by more than 25% year-over-year and achieved a record high.
Shipments of air conditioners exceeded 1,200,000 units in the Q2, an increase of over 35% year-over-year. Furthermore, cumulative shipments of air conditioners in the first seven months of 2022 already exceeded the 2,000,000 units we shipped in 2021. Meanwhile, our refrigerators and washing machines are also gaining market recognition. In this quarter, refrigerator shipment reached approximately 116,000 units, an increase of 30% year-over-year. Washing machine shipment exceeded 240,000 units. Last week, we launched our new tablet, Xiaomi Pad 5 Pro, featuring a 12.4-inch 2.5K display, Snapdragon 870 processor, 20-megapixel front camera on the long side, and ultra long battery life.
It also comes equipped with the MIUI 13 Pad, which offers customized system functions adapted for tablets, offering a compelling experience for both office use as well as entertainment. We continue to be a leader in wearable product globally. Our TWS shipments ranked number three globally, and our ranking in Mainland China rose to the number one position in the Q2. Furthermore, our Xiaomi Smart Band 7 Pro has been well received with its brand-new design. It features a large rectangular display with a thin, lightweight design, as well as a built-in GPS, 117 fitness mode, and all-day health tracking. Since launch in July, it has shipped more than 400,000 units in Mainland China. Now let's look at the internet services. In this quarter, our global and mainland China MAU both achieved record highs.
Our global MAU in June reached 547,000,000 , an increase of 93,000,000 year-over-year. Our Mainland China MAU reached 140,000,000 , an increase of 16,000,000 year-over-year. In addition, our global TV MAU reached 53,000,000 , showing very healthy growth momentum. Our internet services revenue remained stable despite pressures in Mainland China. In this quarter, internet services revenue reached RMB 7 billion. Our internet services growth margin rose 2.2 percentage points quarter-over-quarter to 73% as a result of higher revenue contribution from the advertising business. Our global advertising revenue remained stable despite a decline in industry advertising budget in Mainland China. Thanks to the expansion of our overseas user space, especially in the developed markets, our overseas internet services revenue achieved a quarterly high.
In this quarter, overseas internet services revenue reached RMB 1.7 billion, up 52.1% year-over-year, and accounted for a record high 23.9% of total internet services revenue. Benefiting from multiple monetization engines, our advertising business enjoyed solid performance. In this quarter, performance and brand advertising revenue in Mainland China was down quarter-over-quarter due to the impact of COVID-19, which resulted in lower advertising budget. However, our overseas ad revenue hit another quarterly high, driven by strong operations of our content and services. Our global search revenue has continued to achieve record highs now for the eight consecutive quarters. Besides the growth in Mainland China, improved monetization capability and our expanding MAU base in the overseas market have also helped our overseas search revenue to achieve another quarterly high.
Furthermore, as our pre-installed units increased, and as we work with more global partners, our pre-installation revenue in both Mainland China and overseas markets increased quarter-over-quarter. Our TV internet services revenue continued its robust growth momentum. Driven by enriched content and expanded user scenarios, our TV value-added services revenue increased by about 25% year-over-year. Now let's move on to the more detailed financials. First, take a look at the topline performance of each segment. In the Q2, total revenue was RMB 70.2 billion, and 48.4% came from overseas. Smartphone revenue was RMB 42.3 billion, IoT revenue was RMB 19.8 billion, and internet services revenue was RMB 7 billion. In the Q2 of 2022, our growth margin reached 16.8%.
Smartphone gross margin decreased year-over-year to 8.7%, mainly due to enhanced promotional efforts to clear our inventory, especially during the 618 shopping festival in mainland China, as well as an increase in costs due to U.S. dollar appreciation. IoT gross margin increased year-over-year to 14.3%, mainly due to decreased price of key components such as display panels. Smartphone and IoT gross margin decreased quarter-over-quarter due to enhanced promotional efforts during the 618 shopping festival. Internet services gross margin decreased slightly year-over-year to 73% as a result of lower pre-installation revenue related to smartphone shipments and increased quarter-over-quarter, driven by higher contribution from our advertising business.
In the Q2, overall operating expense ratio was 14.8%, which included expenses related to smart EV, another new initiative of RMB 611 million. We'll continue to invest in R&D, and our R&D expense ratio reached 5.7% in this quarter. Our cash resources remain robust, reaching RMB 102.5 billion as of June 30. Lastly, I would like to provide an update on our ESG initiatives. We actively practice corporate social responsibility and feel honored to have been recognized for our efforts. In July, Forbes placed Xiaomi on its 2022 Best Employer of the Year list, and we were named as China's Best Employer of the Year, China's Most Sustainable Employer of the Year, and China's Most Digitally Responsible Employer of the Year.
Furthermore, we won the Best ESG in the Technology Hardware Sector in Institutional Investor's 2022 Asia Pacific Japan Executive Team Awards. We continuously strive to improve accessibility options and strengthen our data security. For accessibility, Xiaomi unveiled the My Own Voice project, which create a unique and customizable voice for users which, with speech disorders using our self-developed text-to-speech technology. Meanwhile, we collaborated with the Xinyang government to customize the Redmi Note 11E for the elderly and bring convenience to their lives. With respect to data security, we launched Xiaomi Electric Scooter 4 Pro, which is the world's first scooter with gold-level certification in Underwriters Laboratories IoT security ranking. All of these demonstrate our commitment to using technology for good and our mission of letting everyone in the world enjoy a better life through innovative technology. Finally, we have always been committed to public welfare initiatives.
After the flood disaster in Henan province in July last year, Beijing Xiaomi Foundation reconstructed 79 village schools and modernized their teaching equipment. In August, we donated RMB 1 million to Red Cross Society of China Hainan Branch to support the pre-pandemic prevention and control there and the procurement of related supplies. We also try to give back to our community through talent development. Recently, Beijing Xiaomi Foundation has committed to donate RMB 500 million to Beijing Municipal Natural Science Foundation to support research and education. In addition, since February of this year, Xiaomi Young Scholars has been rolled out to over 10 universities in mainland China, including Peking University and Tsinghua University. This concluded our prepared remarks. Let's open the call to 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, please state your question in Mandarin followed by English recap. Thanks. Operator.
Thank you. The question and answer session is now open. To register your questions, please press star one on your telephone keypad. Should you wish to cancel your questions, please press star two. Our first question comes from Andy Meng with Morgan Stanley. Andy, please go ahead.
I would do some English translation. My question is related to the smartphone volume and gross margin. In the Q2, the smartphone shipment has seen slight increase versus Q1 , but the gross margin has seen quarter- over- quarter decline. The management has mentioned 618 promotion and FX issues. Looking into the Q3 , we have seen the continuous launch of high-end smartphone models, including Xiaomi 12S series, Xiaomi MIX Fold 2. Will those high-end products introduce positive impact on the gross margin? Even there's no 618 promotion festival in the Q3 , how should we think about a smartphone volume and gross margin trend in the coming quarters? Thank you.
Thanks, Andy. Let me try to answer your question in English. As I mentioned in my prepared remarks, obviously there are a few factors that drove the declining gross margin in Q2. 618, I think, is one. Obviously that's a big festival in China. The FX, the U.S. dollar appreciation obviously increased our cost versus last year. That has also impacted our gross margin somewhat. In addition to that, last year, I mean, I think it's worth mentioning that in Q2 of last year, so obviously we have a number of high-end products launching in that quarter.
This year, due to the fact that we're waiting for the new Qualcomm chipset to be shipped, the new HN+ , we delayed the launch of our premium products, the 12S Ultra, the 12S series, etc., to the third quarter of this year. As a result, I think there are more, you know, old products that we're trying to sell and clear in Q2, which has caused the margin to decline. Looking forward to the second half, obviously, we were trying to make sure that the gross margin would stay at a healthy level. With some of these new products that we'll be launching in the overseas market, et cetera, we will hopefully be able to maintain our gross margin at a healthier level.
Shipment in the forecast.
In terms of the shipment forecast, obviously we are trying to, you know, you know, with the, you know, depends on a lot of factors in the market. Obviously, we are hoping that the Q2 will be better than the Q1 , as usual.
Second half.
Second half will be better than the first half, as usual, normal. With the fact that there are a lot of overseas events, including Diwali, including the Double 11 event, including the Black Friday, Christmas, et cetera, et cetera. You know, in the normal market cycle, the second half for smartphone shipment it tends to be better than the first half.
Yeah.
Okay. Thank you very much.
Thank you. Our next question comes from Kyna Wong with Credit Suisse. Kyna, please go ahead.
Thanks for taking my question. I have a follow-up question on the smartphone business as well that we see the inventory. We found two things. One is like the provision of inventory impairment that increased in the first half. What kind of inventory the company have applied the provision to write off? The second thing is we see the inventory finished goods actually up 35% year-over-year as well, which how should we expect in the second half along with the new product launch and also the sales promotion in the second half as well? How that will impact to the gross margin, which I don't know. I expect the second half to be staying a healthy level. What should we understand that implication from the inventory perspective?
Thanks, Kyna. Thanks for your question. In terms of our provision for inventory, provision for impairment for inventory, we strictly followed the IFRS accounting standards. For the long date inventory, we will be taking provisions on those long tail products. Obviously, once we sold those products, and depending on how much we provisioned, we'll be able to. Well, if we are selling those at more than we provisioned, then we'll be able to reclaim it back, right? Et cetera. That's something that, as many people highlighted, and as Wang Xiang also highlighted, we spent Q2 clearing some of our old inventory.
There's still something that we need to clear out over time. Obviously we also said that during the 618 festival, we have been successful in clearing a lot of those inventories, especially in China. In China, our inventory has come down to a pretty healthy level at this point in time, right? In terms of, you mentioned the finished goods being much higher in our inventory this quarter. A lot of it is due to the overseas markets. The overseas market, the inventory has stayed relatively high. As we mentioned, this is due to some of the lower consumption power in the overseas market due to inflation, due to FX, et cetera, et cetera, which we won't go into.
We'll obviously spend second half trying to, you know, dissolve some of these finished products using a number of means including, you know, promotions, including adjustment to our production schedules, et cetera, et cetera. To take that back down to a more normal level. It's also fair to say that if we look at the inventory for now, we, you know, although it is high, we don't think that we think that a lot of these are not really big problem for us. A lot of these I think can be cleared with sufficient measures. I hope that answered your question.
Thank you.
Thank you. Our next question comes from Timothy Zhao with Goldman Sachs. Timothy, please go ahead.
Thank you, Wang Xiang and Alain for taking my question. My question is about the internet services revenue. Could management provide some guidance or outlook on how we should look at the MAU and advertising revenue growth into the second half this year, especially as China's macro become more stabilized in the second half? How should we look at the same revenue in the second half in China? Also related to this, because premium phone is quite important for the internet services revenue growth, could management share some color on the proportion of premium phone shipments as a percent of total shipment in Q2, and whether we have any target to achieve for this year? Thank you.
Thanks, Timothy. Let me address your questions, and I'll see if Wang Xiang has more to add. Right. In terms of internet service, and in terms of MAU, obviously as you can see that our MAU has continued to grow pretty healthy. We added close to 90,000,000 MAUs globally. We added, you know, 14,000,000 MAUs in China over the last year. If you look at the past two quarters, in China alone, we added close to 10,000,000 , over 10,000,000 MAUs. So that shows that a lot of the new users are coming to Xiaomi are willing to try out our phones, especially the premium smartphones that we offered.
That will set a very strong foundation for our internet services revenue going forward, both in China as well as in the overseas market. Obviously, in the near term, we are in China especially, the overall ad budget has not been healthy, as you know, given COVID, given some of the regulatory constraints and whatnot have impacted the overall ad budget, right? I think that's something that we've noted many times in the past. This quarter, the certain lockdown of certain cities in China has caused the brand ad budget to drop as well.
What we've seen is, and I see that coming from several of our peers as well, mentioning that the brand advertising budget has come down in the Q2 of this year. That has curbed the overall size of the growth. At the same time, as we mentioned, we've seen quite healthy growth coming from the overseas market with the help of the MAU growth that we've seen. I think in the Q2, in the second half, I think, you know, we have to see how the market develops. Obviously, the overall ad budget for this year, I don't think people are having a pretty robust forecast, and obviously, that will filter down to us.
At the same time, I think the overseas market has been quite healthy for us, especially if we continue to add MAUs to our user base. I hope that answered your first question. Right. In terms of the second question, with respect to the premium smartphones, the one focus that we have this year is to improve the quality of our premium smartphone. I think that's a very important focus for this year. I think that as you can see from the recent launches of the 12S, as well as our Fold product, I think those have received pretty good review from our users. I think that's something that we prioritize this year, making sure that these premium smartphones are of high quality. I think that's something that will set us up with our brand image as well as set us up for much improved premium smartphone shipments in the coming quarters. The other thing is obviously we did not compare year-over-year also because there was some delay in our schedule this year because of the launch of Airbook with what we disclosed in the first half of last year.
Actually, to improve the market share of high-end smartphones is a long effort. We will continue to make improvement in the overall quality of the high-end smartphones. We see a good sign from the market. Now we get very, very positive feedback from the market about our 12S Ultra revenue. We'll continue to To improve the user experience so that in the longer term, we can grow the internet service revenue. The good signal is that we continue to increase the MAU in China and outside of China. As Alain just mentioned, so we keep growing the overseas internet service revenue. That's also very, very good for us.
Thank you .
Thank you. Our next question comes from Hanjin Wang with CICC. Hanjin, please go ahead.
For the internet business, could management share the driver for the strong growth of internet business in overseas market this quarter and our long-term strategy for the overseas internet business? We are very interested about our robot, CyberOne. Could management share some color about our long-term strategy in this area? Thank you.
Let me first address that and then, Xiang can talk about the robot. On the overseas internet revenue, we mentioned a few factors that have driven the growth in the overseas internet revenue. Number one is pre-installation. As our smartphone shipments continue to increase in the overseas markets, the output, which we are able to achieve on a per installed smartphone has also increased, right? So that has helped the pre-installation revenue to increase. Second is search revenue. As our MAU continues to grow, right? The search revenue, the search volume will grow, and as a result, our search revenue continues to improve. You know, I think this is quite straightforward.
Also, I think to note that in the search revenue coming from a user in the more developed market is higher than a user coming from a developing market, right? As we have more users in the developed market using our search engines or using other people's search engines, we're able to receive a share of that revenue, of that search revenue. As we look forward, we do think that there are still a lot of room to grow the overseas internet revenue. Because, you know, we are continuing to penetrate our market share, continue to increase our market share. We got to Europe. We got to number two in Europe this quarter.
We think that there's still a lot of room to improve our monetization in those areas. At the same time, we are also exploring other ways of monetization, not just advertising. Do we have scope to improve our, you know, our monetization, for example, in gaming, in literature, et cetera? Those are stuff that we've been exploring.
Alain, you want to answer the question on the- As we continue to increase our market share in Europe, especially in Western European markets, that will also help us to increase our internet service revenue. Also, regarding the robotics. I think the CyberOne is also, although it's a second generation of our that category, but still, you know, very early stage. Actually the initial idea is to create an open platform so that let more engineers get involved or get interested into those areas. That can help us in the longer term. We can also let a lot of the engineers outside of Xiaomi also participate in those innovations. That's also the current CyberOne is also in a very early stage. The cost is still very high, so we will continue to invest and to explore for the future.
Thank you.
Thank you. Our next question comes from Yingbo Xu with CITIC and, Yingbo, please go ahead.
Could you please give us more colors about the IoT market and overseas market? Thank you.
On the IoT market side, this quarter, the upshot is that we enjoy pretty healthy growth in the China market, Q-over-Q. I think driven by some of the new products that we launched, which are super competitive, including smart white goods, including our pet product, which continues to be quite competitive, and our wearable products. The low light is the overseas IoT market. As we said last year, I believe, some of our overseas businesses, IoT business was hit by very high logistical costs, which continues to stay high as the fuel costs continue to increase. That's one that has hurt our shipments to those markets as well as our pricing in those markets.
Second is some of the macro factors that we've talked about, including high inflation, high interest rate, etc., has really hit the consumption for a lot of our users in the overseas market. They cut down on some of the discretionary electronic spends, such as our robot cleaners, our scooters, etc. I think that's something that we've seen or what happened this quarter. Obviously, as we said previously, we all think that IoT in the overseas market is a huge market. We continue to be optimistic that the market will rebound in the future.
Obviously, in the short term, I think they have to be grappled with some of the factors we mentioned about high inflation, even high U.S. dollars, which obviously caused the purchasing power to drop, as well as some of these geopolitical uncertainty that has limited the outflow of U.S. dollars in some of these major developing countries. I think that hopefully these macro factors will come and go, and then we'll be able to see the growth pick up again in the overseas market.
Operator, next question please.
Yes. Our next question comes from Thomas Wu with UBS. Thomas, please go ahead.
Hello, Wang Xiang, Alain , thank you again for allowing me to ask a question. Just a very quick one. In the overseas smartphone businesses, especially in LatAm, India and Africa, can you give us a quick update on demand and overall environment?
We'll continue to be very, very positive on the growth potential in many, many international markets, for example, the Latin American market. Other mention which market? Latin America, India, and Africa. Yes. Africa and Latin America, right now we're doing very good. I think we'll continue to grow our business in Latin America and Africa. India also. Once we solve the supply issues in India, I think we'll take the Diwali to ship a lot of products into that India market. In the first half, actually, we had some issues on the entry level supply. I think now we have the improvement and then we will continue to work with our partners online, offline, in the second half, especially on the Diwali. Yeah. I think yeah, that's the question. Alain, do you have anything?
Well, look for me, I think, you know, Thompson, I think the questions that you have is the—I don't know—is the overall demand or you're seeing our demand, right? I think the overall smartphone market, I think in many of these areas that you talked about this year in Q2 has seen year-over-year drop, just like the global market. I think that for us, obviously we talk about some of the areas that we've been focusing on, such as Latin America. You know, India, I think that there's obviously more competition coming through. Some people ask why our market share drop in India, but that's also due to some of the supply in the lower market, which we don't have.
We don't think that the loss in market share is at all detrimental to our business. In Latin America, obviously, you've seen that our shipment, despite the overall market difficulty, has continued to increase quarter-over-quarter, and we've been able to pick up market share in those areas. Does that make sense?
Yeah. For example, in Latin America, our market share grow by 3%. Yeah. I see the shipment increase 24%. We think it's very healthy. In Colombia, we keep number one position. Also Chile, we maintain number two position. I think we see a lot of potential in Mexico and Brazil and other countries in Latin America .
Yeah. Thank you. Our next question comes from Leping Huang with Huatai. Leping, please go ahead.
Thank you to take my questions. I ask translated to English. The Xiaomi maintain very high operating efficiency in last few years, including the gross margin 17.7% and the 7.9% for the operating margin last year. Because I see that the revenue was due to the revenue decline, we see operating efficiency was declining in last three quarters. Well, I fully understand that you need to balance the future investment, especially on electric vehicle, but I want to know how you keep the balance in between the investment and operate efficiency in these difficult times. Thank you.
Actually we continue to invest into the R&D. If you look at the R&D investment volume actually is increased significantly. I think the challenge for us is because of the demand issue our revenue dropped, right? That will impact the efficiency. That's the issue. We are very confident long term we will continue to invest into the R&D, including the mid-and high-tier products and the new initiatives. We believe that will help us in the longer term. At the same time, of course, we will do everything possible to increase our shipment and our market share in China and also in many other strategic regions like I just mentioned Latin America and Europe and China. Yeah, Alain.
Do you have any minimum requirement on this operating margin as we operate the company? Thank you. Sorry, Alain.
I think, Leping, I mean, obviously like, a lot of our peers, we are also trying to control our costs as well. If you look at the disclosure on our head count, you'll see that we reduced our head count Q2 versus Q1. Not a lot, but obviously the effect will take some time to come through to the bottom line. You know, obviously, at the same time, while we are reducing our head count, we also been increasing our head count in some of these new areas like electric vehicles, right? It will take time for these effects to come through.
We are doing like what a lot of our peers in the industry are doing, trying to extract more efficiency into our business, right? Number one, while balancing the increase in expenses related to the new initiatives. I think that's one. Two is obviously, we're also trying to improve the core profitability of our business, the profitability of our core business at the same time, right? We think that, you know, there's still a lot of room to grow our operating profits. That's something that we are looking to do in the future.
The third thing is in terms of the target we have in mind, I mean, obviously, you know, if you look at historically, our operating margins have been in kind of around the 10%-12% area, right? The operating expense ratio was about a 10%-12% area. This is something that, you know, if we see the environment improve, well, we'd like to get back to that level.
Okay. Thank you very much. Thank you.
Thank you. We will now invite last questions, and the question is come from Gokul Hariharan with J.P. Morgan. Please go ahead.
Yeah. Thank you. My question is regarding EV. So it looks like Xiaomi is following a bit more of a full stack strategy on the EV development, including in-house manufacturing, developing the full autonomous driving stack, et cetera. Could we talk a little bit about how Xiaomi decides what to do in-house, what to go out with other vendors, given that in the smartphone side, and other IoT devices you had taken a very asset light and more partner-centric kind of approach, to address that market. Also on the autonomous driving, given that you showcased your solution recently, should we think of Xiaomi as a competitor to Baidu Apollo or Huawei, or you're going to be more like a partner to those software-centric companies? Thank you.
Well, I think on the Gokul, on the EV side, we look at all possibilities, right? I think as you can see from the past, we've done, you know, some of these we've done self-development. We've also acquired companies like DeepMotion. We've also invested in a lot of these related technology companies through our investments team. I think we're taking a fairly flexible approach in terms of open approach, I should say. I shouldn't say flexible, I should say open in terms of whether we do it in-house, whether we partner, whether we, you know, use investments as a vehicle, et cetera, et cetera. I think that's something that we look at all possibilities and we find the best thing for us to do, put it this way.
That's how we approach this, number one. Number two, in terms of autonomous driving technology, at this point in time, I think we are just looking to use all these technology in-house for our own car. We haven't thought about, you know, licensing it out to other people or enabling other technologies. This is also similar approach that we take in our smartphone business. I hope that answers your questions.
Okay. Understood.
Thank you. This concludes today's conference call. Thanks again for joining us. You may now disconnect.