Evening, ladies and gentlemen. Welcome to the investor conference call hosted by Saumyu Corporation regarding the company's 20 2Q4 and annual results. I am Yale Chang, Investor Relations Director. Before we start the call, we would like to remind you that this call may include forward looking statements, which are underlined by a number of risks and uncertainties and may not be realized 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 financials prepared in accordance with IFRS. Joining us on the call today are Mr. Wang Xiang, Partner and President of Xiaomi Corporation and Mr. Alan Lam, Chief Financial Officer and Vice President of Xiaomi Corporation and Deputy Chairman of Aerstar Digital Technology. To start, Mr.
Lam will share strategic initiatives of the company and review the business and financial performance for the Q4 and full year of 2020. Following that, we will move on to the Q and A session. I will now turn the call over to Mr. Alan Lan.
Thank you, Yale. Good evening, everyone. Thank you for joining us today. I'm very pleased to say that our business has delivered a very solid Q4 to end 2020. And I would like to use this call to share with you our latest business update.
As you can see from the press release that we pulled out a couple of hours ago, in the Q4 of 2020, We continue our growth trajectory as our revenue grew 24.8% year over year to reach RMB70.5 RMB 1,000,000,000. We also recorded strong growth in our adjusted net profit, which increased to RMB 3,200,000,000, which represent a year over year growth of 36.7%. In 2020, we achieved record revenue of RMB245 1,000,000,000, which was up 19.4% year over year in a very challenging market, while our adjusted net profit for the period increased to RMB13 1,000,000,000, which is a record for us and a year over year growth of 12.8%. All of our business segment delivered solid growth, reflecting the resilience of our business model in a very challenging market. I would also like to highlight the strong performance of our of smartphone business in 2020, in particular, in the last quarter of the year.
Our global smartphone shipment maintained our top 3 position with a market share of 12.1 percent, and we achieved the highest year over year shipment growth among the top 5 smartphone companies. Moreover, we expanded our global footprint. As of December 31, 2020, Our smartphones were sold in more than 100 countries and regions globally. We continue to gain our market share in mainland China. Smartphone shipment rose to 12,200,000 units in the Q4 of 2020 according to Canalyst from 8,100,000 units in the Q4 of 2019, which was up 51.9% year over year.
Correspondingly, as you can see from our presentation, our market share in Mainland China rose to 14.6% in the Q4 of 2020 versus 10.7% in the Q4 of last year. We continue to strengthen our position in the premium smartphone market. In December 2020, we launched our flagship Mi 11, which is the which was the world's 1st smartphone to feature the Snapdragon 888 Chipset. The shipment of Mi 11 in Mainland China surpassed 1,000,000 units within 21 days of launch. Notably, according to our information, More than 50% of Mi 11 users in the 1st month after our launch were new Xiaomi users.
In 2020 as a whole, we sold about 10,000,000 premium smartphones globally, which in our definition represent retail prices at or above RMB3000 in Mainland China and RMB300 in equivalent overseas markets. The relentless pursuit of cutting edge technology is part of our core values. In recognition of this, Teradata Analytics named us among the top 100 global innovators for the first consecutive year. A major testament to our advanced technology capability lies in the charging area. Following the successful launch of the 120 watts wired fast charging and the 80 watts Mi wireless charging technology in 2020, We launched the next generation remote charging technology, which we call Mi Air Charge in January 2021.
This latest technology enables our users to remotely charge smartphones without any cables or wireless charging stands. In February, we launched our 1st quad curved waterfall display concept smartphone, which featured an 88 degree high cut curved screen that extends to cover almost the entire frame of the smartphone. With a smartphone body free of ports or buttons, this futuristic design underscore another revolutionary exploration in the next generation of smartphones. And if you have watched the news, we are going to have our next gen product launch next Monday. We are strategically expanding our retail channel as we seek to cover every county across Mainland China and to make our Mi Homes accessible to Mi fans everywhere.
As of December 31, 2020, we had over 3,200 retail stores, which was up over 1,000 stores from the end of September 2020. To ensure high operating efficiency, We are building a fully digitized new retail system to support these knee homes. We are deploying our proprietary retail management platform to consolidate and analyze real time data, including user traffic, including in store sales and including our inventory to strengthen our stores and to strengthen our store management. A lot of people are interested in our Internet business. We are pleased to say that during the Q4 of 2020, we have completed the reorganization of our Internet and Software Business Units, which consolidated our historical Internet unit into 3 major units.
Number 1, the software and experience department, which focuses on enhancing our user experience and interconnectivity across devices for our MiUI operating system. Number 2, the Internet business department implements monetization strategies for our Internet services, including content distribution, business cooperation and marketing strategies. And number 3, the data services platform is focused on enhancing big data analytics and leveraging our data to improve our business operations. We have appointed our next generation young talent to lead each of these Internet departments. We believe this young management team will bring better experience to our users, help our Internet service business grow and create greater value for Xiaomi as a whole in the future.
Now with that, let's Slide deeper into each of the segments. 1st, starting with smartphones. In the Q4 of 2020, Our smartphone revenue increased 38.4 percent year over year to RMB42.6 billion, ending the year on a very upbeat note. Smartphone revenue for the year was RMB152.2 billion, which was up 24.6% year over year. If you look at the operating results in our smartphone business, For both the Q4 and for 2024 year, we achieved year over year growth in both in all of smartphone shipments, ASP and gross margin.
As we increase our smartphone shipment globally, we're also selling a higher proportion of mid to high end phones and increase our 5 gs penetration, which helps to lift the average selling prices. We hope to further improve our product mix and achieve greater operating efficiency in 2021, which allows us to improve our smartphone gross margin. In Mainland China, we further strengthened our leading position in the online channel. Our online smartphone market share increased to 29.5% in the Q4 of 2020 according to third party statistics from 17.1% a year ago. Additionally, our sales volumes during the Singles Day and Double 12 shopping festivals in 2020 ranked number 1 among Android smartphones on all major e commerce platform, including JD, Tmall and Suning.
As we continue to execute our dual brand strategy, we have become more firmly established in the premium smartphone market. Following the launch of the Mi 10 series, as I mentioned earlier, We expanded our premium brand portfolio with Mi 11, starting at prices with prices starting from RMB29.99, and we are very well received in the market, as I previously mentioned. Also, Our launches of the Redmi Note 9 series priced at about RMB 999 demonstrate our commitment to making smartphone to making 5 gs and advanced technology accessible to the mass market. Now let's move on to the IoT and lifestyle products. We remain committed to our core smartphone times AIoT strategy, which continue to underpin our successful performance.
At the same time, we've been very focused on improving our user experience by reducing our SKU last year. Anyway, leveraging our large user base and leading position in this market, Our IoT and lifestyle product revenue increased 8.8% year over year to RMB21.1 billion in the Q4 of 2020. As a leading consumer AIoT platform, We further expanded our global AIoT user base during the quarter. As of December 31, 2020, The number of connected IoT devices on our AIoT platform reached 324,800,000, up 38% year over year. Moreover, the number of users who had 5 or more devices on Xiaomi's IoT platform Exceeded 2,000,000 users for the first time and was up 52.9% year over year.
In December, our AI assistant had 86,700,000 MAU, an increase of 43.5 percent year over year. Also on Mi Home app MAU reached 45,000,000, of 22.1 percent COPD. In the TV market, we further strengthened our leadership position and further broadened our premium and ultra large screen TV portfolio. Global shipment of our smart TVs reached 12,000,000 units in 2020. According to ABC, our TV shipment in the Q4 of 2020 ranked 1 in Mainland China, for the 8th consecutive quarter.
In particular, in the large Screen portfolio, our shipment of over 70 inches smart TV also ranked number 1 in mainland China with a market share of over 27%. We have devoted more resources to our AI speaker and routers to enhance smartphone connectivity and to enhance interactive experiences. As you can see, the global shipment of our AI speakers exceeded 10,000,000 units in 2020. Global shipment of our router exceeded 15,000,000 units in 2020. Both of them are achieved leading market share in the Chinese market.
We have also expanded our overseas footprint for IoT and lifestyle products as our brand has become more recognizable globally. Our IoT and lifestyle products were sold in more than 80 countries and regions in 2020. And products such as Mi Band, Mi Robot Vacuum Cleaner and our electric scooters continue to be well received by overseas users. Looking ahead, we're trying to capture a greater share of these overseas markets and bring a broader range of novel and innovative IoT products to an even bigger user base in the global market. Now let's move on to the Internet Services segment.
In the Q4 of 2020, our Internet services revenue increased 8.4% year over year to RMB6.2 billion. In this quarter, our advertising revenue hit an historical high of RMB3.7 billion, an increase of 23.1 percent year over year. Also in the 4th quarter, our Internet service margin rise to 68.4%, which was an historical high, due to a significant contribution from our advertising revenue and as our Fintech gross margin has recovered from the lows in the early part of 2020. Our global MIUI MAU increased 28% year over year to 396,300,000 in December 20 20. In Mainland China, the MAU of MiUI grew from 109,400,000 in September 2020 to RMB111 1,000,000 in December 2020 and further expanded to 114,500,000 in January of 2021, which underscore a growing trend in our user base.
Furthermore, if you look at our smart TV and Mi Box business, the MAU increased 48% year over year to over 40,000,000 in December of 2020. We want to deliver the best quality user experience to our users. If you look at our latest MiUI 12.5 system, It enhances user experience further and further protects user privacy. To highlight a few improvements, The UI 12.5 is faster, lighter and smoother and has an improved dynamic design and interface. To increase privacy protection, it provides fussy location and other functions to avoid unnecessarily disclosing sensitive user information.
An important feature of MiUI is also to facilitate cross device collaboration, seamlessly synchronizing work between smartphones and laptops, which you will see increasing features in 2021 as we launch our new series of laptop products. Our Internet business overseas continued to grow rapidly. In the Q4 of 2020, overseas Internet revenue increased 55.1% year over year and accounted for 14.1% of our total Internet services revenue. This growth was boosted by increasing overseas smartphone sales volume and the expansion of our overseas user base. Talking about overseas, let's turn to the overseas market.
In the 4th quarter, Our overseas revenue grew 27.6 percent year over year to RMB33.8 billion. Revenue from the overseas market reached RMB122.4 billion in 2020, up 34.1% year over year. Our smartphone market position remained solid in major markets worldwide, with our market share ranking 1 in 8 markets globally and among the top 5 in 54 markets, according to candidates. Particularly, I would like to highlight our success in Europe. We ranked top 3 in Europe for the 1st consecutive quarter, while gaining strong growth momentum in Latin America.
In the Q4 of last year, our smartphone shipment in Europe climbed 33.9%, and we had a market share of over 15%. Notably, we ranked 1 in Central and Eastern Europe for the first time ever, and our smartphone shipment in the region increased 17.5% year over year with a market share of close to 25%. We also retained our top spot among top 3 in Western Europe as our smartphone shipment rose 57.3% year over year. Lastly, talking about Latin America. Our smartphone shipment in Latin America surged 215.4% to achieve a market share of 9%, ranking 4 in the region.
As an effort to increase our market share in the overseas market, I would like to highlight 2 channels. Number 1 is our online channel. We ship more than 16,000,000 smartphones through the online channel in the overseas markets. This is more than a 90% jump year over year. If you look at our carrier channel, In the overseas market, our smartphone shipment has already exceeded 9,000,000 units, which represent a growth of over 4x year over year.
And if you look at the market share, it has increased to 7.4% in the Q4 of 2020. In the next few slides, I'd like to discuss our financials. As I mentioned before, In the Q4, our revenue reached RMB70.5 million, which is up 24.8% year over year. In the Q4, revenue from smartphone increased 38.4 percent year over year to RMB42.6 billion. Revenue from IoT and Lifestyle Products grew to RMB21.1 billion, which was up 8 percent year over year and 16.2 percent quarter over quarter.
Our revenue from Internet services reached RMB6.2 billion, which was up 8.4% year over year and 7% quarter over quarter. Despite the pandemic and the global economic uncertainties, our total revenue increased 19.4% year over year to reach RMB245.9 of RMB9 1,000,000,000 in 2020, which was driven by strong momentum in our smartphone business as well as healthy performance from our IoT and Internet Services segment. Overall, our gross margin showed continuous improvement. Our overall gross margin increased to 16.1% in the Q4 of 2020 compared with 13.9% in the same period of 2019 and 14.1% in the prior quarter. If you look at the gross profit margin for our smartphone segment, It has rose to 10.5% in the 4th quarter from 7.8% in the Q4 of 2019, which was mainly due to the improvement of our product mix.
The gross profit margin for our IoT and lifestyle products Increased from 9.4 percent in the Q4 of 2020 to 12.9 strong growth in our IoT products with higher gross profit margin. As I mentioned before, the gross profit margin of our Internet Services segment increased to 68.4% in the 4th quarter due to a higher revenue contribution from our advertising We continue to step up our investment in brand building and R and D. Our operating ratio climbed to 13.4% in the Q4 of 2020 from 12.1% in the same period of 2019. Our R and D expenses totaled RMB9.3 billion in 2020, which was up 23.5% year over year. As a summary, our adjusted net profit went up to RMB3.2 billion in the Q4 of last year, which was up 36.7% year over year.
And our adjusted net profit margin grew to 4.5% in the last quarter of last year. For 2020, despite increased investments, our adjusted net profit reached a record high of RMB13 1,000,000,000, up 12.8% year over year and represent an overall net profit margin of 5.3% for the year. At the same time, we maintain our efficient approach to managing our working capital. Notably, our AR turnover days were relatively steady at 15 days in the Q4 of last year. The inventory turnover days was 58 days in the 4th quarter compared with 54 days in the 3rd quarter.
The cash conversion cycle was very healthy at minus 30 days. We continue to generate strong operating cash flow in our business. In the Q4, net cash generated from operating activities totaled RMB13.3 billion, when the adjusted operating cash flow was RMB11.9 billion. Net cash generated from operating activities reached RMB21.9 billion in 2020 and was RMB16.3 billion, if you exclude the impact of our FinTech business. Our enhanced cash position set us up with a solid foundation to capture better market opportunities.
As you can see from this chart, as of the end of last year, we had cash resources of over RMB100 1,000,000,000, which was up 63.5% year over year. Thanks to strong operating cash flow and our financing in the capital markets. Our strategic investments to make remarkable achievements with an increasing number of our invested company having gone public in both Mainland China and overseas in 2020. As of December 31, 2020, we had invested in over 310 companies. In 2020, we generated an after tax net gain of RMB2.2 billion from disposal of investments.
As of the end of last year, the total value of our investments reached RMB67.3 billion, which represent HKD3.2 per share. We'll continue to build on our resources and advantage and invest aggressively to empower our ecosystem companies, which we believe will generate deep business synergy and steer the evolution of smart manufacturing over time. Finally, I'd like to give everyone an update with regard to the ongoing litigation in the U. S. On January 14 this year, the U.
S. Department of Defense designated Xiaomi as a Communist Chinese Military Company or CCMC, which will have prohibited for U. S. Persons from investing in our securities. We believe that this designation is unlawful.
And as such, on January 29, We filed proceedings in the U. S. District Court against this designation. On March 12, as all of you may have seen, The court has agreed and has granted our motion for preliminary injunction, thereby removing restrictions on purchasing and holding Xiaomi securities by U. S.
Persons. We do believe that this decision, The decision to designate us as a CCMC is arbitrary and capricious, and the judge agreed with us. We will continue to request that the court permanently remove their destination, and we will keep everyone updated of new developments. With this, we've concluded our prepared remarks. We'd like to open it up for questions from the investors.
Thank you, Alan. We will now proceed to the Q and A session. Please limit your questions to a maximum of 2 that we could allow more investors to ask their questions.
Thank you. The Our first question comes from Gokul Hariharan with JPMorgan Hong Kong. Please go ahead. Thank you.
Thanks for taking the questions. Congrats on the good results management team. My first question is regarding The monetization in overseas markets looks like that seems to be picking up Quite steadily, it was about 12% of revenues in Q3, looks like about 14%, growing at about 55%. You talk a little bit about what are the avenues that you're exploring in terms of monetization? And could you also talk a little bit about What is in store for the future?
That's my first question. Second question is specific to China. We have seen Fairly good market share gains in the last several months, going from 10% to 14%, 15% market share. MAU is just starting to grow. So how should we and investors think about the relationship between Xiaomi smartphone share gain and China MAU growth, given that that's going to be one of the key drivers for Internet Services growth in China?
Thank you.
Okay. This is Shawn. Maybe I will give my comment and then Alan will add. So the first question is related to the Internet service revenue overseas, right? So I think officially, we have not officially started the monetization outside of China.
But because of our strong growth of our smartphone business, because of the market share Increase in many, many regions, especially in the European regions, that will generate very healthy Internet service revenue growth. And at the same time, actually, we are building a partnership with the local players try to build an ecosystem for the future to further monetize our business, actually, our overseas Internet service business overseas, overseas market. That's the answer. We see a very, very healthy and strong growth in that segment. So the second question is related to Hanan's menu.
Of course, in China, you see we have very healthy MAU growth. And also, not only because of the MAU increase and also because we are driving more High end and premium tier smartphones that will also help to generate higher ARPU from the Internet services, for example, gaming and other services. And also, we continue to increase our MAU not only on smartphones, but also on smart TVs, that's also helped us to have more service opportunities to our users. That's the major reason for the growth.
Yes. Hey, Gokul, it's Alan. I'll supplement what Shandong has said in a couple of ways. In the overseas market, obviously, we're exploring different ways of monetizing further, But whether it is gaming, whether it is advertising, we saw quite healthy growth in our browser business actually in the overseas market. So that's number 1, and we'll continue to explore other ways to monetize that further.
But as you can see, I think the growth in our user base allowed us to have extract a higher percentage of our Internet services business in the overseas market. In China, I mean, obviously, we understand a lot of your analysts' concerns about our Chinese monetization. And that's why we decided to put in the January 2021 MAU numbers. As I said as I mentioned before, the Mi 11, a lot of the users come from new Xiaomi users, which allow us to grow our MAU base. And we continue to see quite healthy trend in February March of that MAU numbers.
So that's part number 1. Point number 2 is on the premium side, we've also seen a much higher monetization in our premium smartphones versus our entry level smartphones in terms of Internet services, right? I think the gaming revenue as we look at Mi 11 versus some of the other phones. It has been it has monetized very well. In fact, it's multiple times over some of the other phone models, number 1.
Number 2 is also, I think if you look at the pre low revenue, pre low ARPU coming from of the premium smartphones. It's also much higher than the other kind of entry level smartphones. So with that, I think hopefully, as we continue to penetrate the premium side of the market. We continue to see higher monetization in our Internet services revenue. At the same time, I'll caveat by saying that we've also been trying very hard to improve user experience by streamlining some of our advertising space.
So I think this is kind of a balancing act over the year. But I think we'll see very healthy advertising revenue this year. Gaming has all I mean, has been I think we have to see the effect from some of the New revenue sharing model are going away and then before the growth will start, I think, second half of this year. And then I think that we're obviously exploring other monetization avenue, like as Shandong said, in the TV market when we have a very good market share.
Got it. That's very helpful. Thank you very much.
Thanks, Phil. Thank
you. Our next question comes from Quan Shudong of CICC. Please go ahead. Thank you.
Hi, management. Thank you for taking my question. My first question is about the gross profit margin. Your gross profit margin in 4th quarter is very strong, Especially for smartphone, which increased to 10.5%, what's behind this positive change? And How much of foreign exchange affected?
And how can we forecast gross profit margin in 2021 since there is some prices of means our raw materials goes up a lot. That's my first question. And I will have a follow-up.
Thank you. So yes, we have a very strong gross margin increase in Q4. I think The reason the major reason is number 1, the product mix. While we are shipping more and more premium tier smartphones to the market, so That's generated more profit. That's the one.
Number 2 is that's a product mix. Number 2 is because of the shortage, so we are we were not very aggressive on marketing or promotions. So that's also helped us to have a higher gross margin. I think in the future, we'll continue to offer more and more premium tier smartphones.
So we will
even during the challenge period of the supply, I think we want to do carefully use our resources. We hope we can maintain a healthy gross margin.
Okay. And my second question is about the offline store. Since offline store will be a very key strategy To improve premium end market, especially in China, could you tell us what's your plan and strategy for opening those stores, especially in 3rd tier or 4th tier cities in China?
Yes. We have a plan to cover all the countries of China with Xiaomi stores. So we are on track To build those stores, by the end of 2020, we have 3,200 stores, right? So actually, we keep adding the numbers. You see the increase rate will be very high.
So that's one side we continue to build more stores. Actually, even more importantly, not only building more stores, But also, we use our we build our own system to manage the stores. We will have a we designed a system to track the traffic And also the sales of each store so that we can improve the efficiency of the sales channel. This is a long term strategy for Xiaomi offline sales for Xiaomi offline sales. I think In the 2021, we will build more and more stores in the Tier 2 The Tier 3, Tier 4, Tier 5 cities to cover almost every company.
That's the goal.
I think with respect to our offline store strategy, Obviously, we are approaching it from a relatively asset light approach as well. We rely on a lot of our partners to open the stores, and we'll support it with our system to enable them to achieve the same level of operating efficiency that we achieved in on our own stores. So I think the plan is obviously to build it to have an aggressive plan of building the store network out to compete with some of our competitors. But at the same time, I think we will maintain a relatively asset light approach and but using our system to enable our partners to achieve the same level of operating efficiency, if that makes
Thank you. Our next question comes from Kina Wong with Credit Suisse. Please go ahead. Thank you.
Thanks for taking my questions. So the first question, actually, I would like to ask. The strategy of like the company in order to Acquire some of the ecosystem company like just the announcement of Zummi. So I would like to know the intention and how to compete the LiSco portfolio in the IoT business. That's the first question in terms of IoT strategy.
The second thing is about, we see the growth in the IoT business Sounds like it's lower in terms of like 3rd quarter recovery. What's the reason behind? And how should we See the growth momentum in 2021. What's the plan for the product launch and how the company to achieve further, I put expansion and also market expansion. Thanks.
Sure. Thanks, Tina. I think on Cinmi, I think I'll note a couple of things, and thanks for pointing this out. We did release A circular today that we're going to acquire the remaining 50.1% of Celine that we didn't own already. So first of all, as a background, we spent $1,000,000 basically $100,000,000 last year to acquire 27.4 percent of Cimi, which because we have some existing ownership, which took us to 49.9%.
That was last year. And this year, we're spending, call it, RMB200 1,000,000 to acquire the remaining portion, which if you do the math, it's actually the same valuation as a year ago when Zimi has continued to grow. The reason for acquiring Zuni is because we do think that they have a number of core competence that they would like, especially in terms of IoT, the R and D and product development capabilities in the IoT segment, particularly in power management, which will help us achieve a which we can leverage looking with our own IoT portfolio that we that will manufacture as well as whether we can have the battery management systems to help us further lower costs. So I think that, that will help us enhance our ecosystem competitiveness in the future. And also, I think they have not only is their product development capability, they also have their own kind of supply chain management systems that can help us.
And so I think that's we will selectively look at Other opportunities, although obviously, there's nothing in mind at this point. But as we further develop our smartphone times AIoT strategy. I mean, obviously, it's core to own some of the core IP and R and D capability so that we can build out that portfolio further. 2nd, with respect to IoT business, I think 2 things impacted the growth this year. Number 1 is obviously the pandemic, which delayed the rollout of some of the larger kind of white good products earlier part of this year, which we're seeing picking up in the second half.
2nd is we have been trying to Optimize the number of SDKs to focus on those that are more focused connected to our smartphone business. That's why we have deliberately tried to manage the number of SKUs that we have in our portfolio. 1, to further enhance the interconnectivity with the smartphone and second, to help enhance user experience like how we do it for our Internet business. In the Q1 of this year, we have already seen a very significant pickup in the IoT business. I think especially the peak seasons or some of the white goods are in the first half in the first quarter before Chinese New Year.
And we've seen Some of them are shipping very well. And as you can see, our TV, which we launched our Remi TV last month, I think it's also been selling quite well. So we're seeing a pretty significant recovery in that business in the Q1. And also second thing is, obviously, as I mentioned Before in my prepared remarks, we have seen or we are going to expand aggressively into the overseas business. We already have a pretty significant business last year in the overseas IoT business, and we'll continue to focus on that, again, leveraging on our smartphone market share, our brand name to get more of our IoT products overseas.
Thank you. Our next question comes from Yu Yingbo with Citix. Please go ahead. Thank you.
Thanks for taking my questions. My first question is about the Internet sector. Take the Internet sector as an overall, We find that the cell phone companies feels difficulties in the game area in the second quarter second half last year. But However, we still got a 2 double digit increase in Internet revenue. So we think that, that is good.
Could you please give us more colors on This year's Internet revenue increase. This is my first question. And the second one related to AIoT. We noticed that some third party AIoT plus companies is trying to enlarge their exposure in AIoT area to empower or enable more home appliance companies to be connected in this area. So how do you see this kind of competition with our AIoT?
And considering the competition, Will we be more ambitious in the AIoT area? And what's more, how do we another Question, how we consider about another AIoT like auto because auto is a very Interesting AI OG area investors are curious about.
Sure. Let me take the Internet question first. I think we'll continue to see a pretty healthy growth in our Internet business this year. I think I mean, obviously, our Internet business has a lot of different components. And I think last year, the growth was Certainly impacted by our FinTech business because as we try to as we continue to reduce our balance sheet usage.
So you've seen a corresponding decrease in revenue in our FinTech business. But I think in the second half of last year, we've already seen, although the revenue decrease continue to decrease for FinTech Business on a year over year basis. But the margin has improved as we shifted to a more kind of platform business as opposed to a balance sheet business. And we expect that to continue this year. So if you look at Our Internet business this year, we are quite optimistic, but we do got we'll get hit in a couple of ways, I think.
Number 1, In our gaming business, when the year over year comparison in the first half will be very difficult, just given last year, it was a good first quarter in the gaming business due to the pandemic. And also on the FinTech business, again, as we continue to shrink our balance sheet usage, The top line will decrease, but the margin will continue to improve. So I think that's the first Part second part is obviously, as we mentioned before, as our shipments continue to grow, we do expect the advertising revenue to pick up as a result. And as our premium segment of our smartphone continue to grow, we do expect the revenue to increased disproportionately versus some of the entry phones. And also on the TV side, as we continue to maintain our leadership position in TV, We are looking at beyond just kind of advertising, is there other ways to monetize in terms of content and other sources.
So I think that's we are quite optimistic about the Internet business as a whole. In terms of the AIoT competition, I mean, obviously, I think our success has certainly lead to many of our competitors wanting to get into this area. I think we are differentiated in a couple of ways. Number 1 is obviously the connectivity that we're exploring for all of our AIoT businesses our AIoT products with our smartphones. So not only are we just producing kind of a Battle for money consumer electronics products, but we're also exploring their interconnectivity between devices and between our cell phones, right?
So that's something that I think will have a competitive advantage over some of the other players that simply make One product or a couple of products, they don't have the portfolio to compete with us, right? I think that's the first part. 2nd part, obviously, as we as you know, We do our ecosystem product, ALT product a lot from our investments, from our ecosystems. And so I think we do have a big network of people doing R and D for us. So it's not just our own R and D.
I mean, obviously, we have to have our own core R and D. But at the same time, through our 300 plus investee companies, More than 100 are focused on ecosystem products. I mean, I think we're using that and leveraging their R and D capability, leveraging their network to help us build better products for our users. Yes.
Just to add one more thing. We are putting a lot of efforts to improve the user experience with our smartphones and ALT products. So not only in the connectivity side, but also the user experience. So for example, smartphone can very, very easily and smoothly connected to different screens to share content among different screens and devices. And also, we use one simple app to manage all the IoT products or wearables
in your home, on the go.
So I think that's the uniqueness of our business. We'll continue to invest into that area. We are still the largest AIoT platform in the world. So yes, we will focus on the user I think that's the strength of us.
Okay.
Thanks, Xiaozhou and Alan. Could you please talk a little bit more on Alto?
So yes, we made announcement. We made a notice, right, in the Hong Kong.
Yes, So we put out the announcement saying that we haven't really established an internal project on making electric vehicles. So There's so much else we can say about that at this point. Yes.
Got it. That's helpful. Thank you.
Thank you. Our next question comes from Frank He with HSBC. Please go ahead. Thank you.
Thanks for taking my question. I have 2. The first is about the GP margin on the smartphone. So given the current very tight chip supplies and also some chip shortages So across the supply chain, so just wonder what's the strategy for Xiaomi to secure enough sufficient chip supplies And whether there's any cost pressures related to our smartphone and IoT business? Thanks.
So yes, this is right now, we are in the shortage. Not only us, the whole industry is in the challenge of the shortage. So this is I think This is very normal in the semiconductor industry. Every couple of years, maybe 3 to 4 years, the industry We'll have the similar challenges. But this time, it's very, very serious.
But What we can do is we work with our suppliers very, very closely to optimize the supply And also the carefully manage our product launch schedule so that we can make up, How to say, to match for the supply, to continue to improve the efficiency, carefully use the capacity all resources we have. Another thing I want to mention is we actually We have a very, very strong growth in the 2021. So even during the shortage, we'll continue To grow our business, we'll see a strong growth. We are working with the major suppliers very, very Carefully. So we are I think we stay confident for year 2021
for the
business growth, not only smartphones, but also IoT products in China and also outside of China.
Okay. And then my second question is about your The offline versus online distribution channel, given you ramp up the offline channels in the lower tier cities, Do you have any target regarding the sales contribution from off line in China in this year or maybe in the coming few years? And also what's the implication on the margin side? Do we see any positive or negative impact from these sales mix changes?
So our target is to have a Xiaomi store in every country of China. This is our plan for China domestic market. So we are working on those plans on the execution side. So we see a strong momentum for the increase of our offline stores. Not only the number of stores, but also The IT system to manage those stores so that we we design that system so that we can track On a daily basis of our activations, sell in, sell out, so that we can improve the efficiency.
That's the key part
of our business model. So
Yes. This is what we are doing now. So yes, I think you see our The gross margin increase in Q4 is because of the shortage and also the product mix. So we'll continue to optimize our cost structure so that we can offer more and more very, very attractive product to the consumer. That's our plan.
Okay. And just a very quick follow-up on the Zuni acquisition. So just to make sure clear that it is Consolidated starting from this month or it will not be consolidated? And is that possible to discuss a bit About the revenue side last year? Thank you.
Oh, Yes. Thanks. Well, I mean, we still have to go through the final process before closing. We are hopeful that The closing will be in the Q1 of this year. So after that, we'll consolidate Zimmy as a 100% owned subsidiary.
But it's not going to be a very significant impact to our P and
Okay. Thank you very much.
Thank you. We now invite the last question, which will come from Robert Chen with Merrill Lynch in Hong Kong. Please go ahead. Thank you.
Okay. Yes. Thank you. Thanks, management on the group results. My question is on the Internet side.
I think in the 4th quarter, The Internet gross margin reaching to 68.4%. This is much higher than The Q3, even the same time last year, at that time, it's basically only 60% to 63%. So we want to know what's the main reason on High margin on the Internet basis. And can we expect this kind of margin going forward? And it's also on the Internet is Basically on the revenue growth side, because if we're looking at this year, the value added revenue in 4th quarter, value added Revenue actually declined 11%.
And so if we're going forward to looking at the business, I mean, the only one has higher growth advertising advertisement. So and the gaming is actually is also not really growing. So Can we say I mean, because of Alan's mentioned about, I mean, CMA positive on Internet, but can we say the really high growth CMO coming on from advertisement? Okay. I think that's my question.
Thank you. Yes.
Thanks, Robert. I think I mean, as I mentioned before, I think Q4, The gross margin for the Internet business was really driven by product mix in a way, right, being the advertising revenue being a bigger A pretty high proportion of our of that business, number 1. And also number 2 is the fintech business, as I mentioned before, has improved in their gross margin over the few quarters. Is that sustainable going forward? We would like to think that over time, we would like to make sure that the Internet business become more balanced in terms of their portfolio, right, with a fair mix from advertising, with a fair mix from games and other value added services.
So with that, I'm not I mean, obviously, I'd like to say we can achieve a higher gross margin, but I'd like to be optimist I'd like to optimize our portfolio as well and make sure that we have a healthy mix between advertising and gaming and other value added services, if that makes sense.
Okay. Yes, got it. Probably another follow-up is also on the margin side because of the I mean, like, Xiaozheng say, right now, I mean, basically a lot of components in shortage, especially IC. Have you think about the impact because of another component pricing recently, they'll go higher Chip said and your CCR, this component, I mean, do we expect this will impact margin On the basically second quarter or even the whole year this year? Thank you.
So I think, Yes. We will continue to optimize the cost of our hardware devices. That's for sure. We'll continue to do that. But we know during the shortage, a lot of increase of our cost because of the shortage.
To be very honest, we will do our best to offer the best price we can to our consumers. But sometimes, we may the consumer may we may have to pass part of the cost increase to the consumer on the different cases In the different cases, so we will continue actually to monitor the cost impact on our hardwares. But so far, we are doing okay. We feel pressure, but We're working okay.
Thank you. This concludes the conference call today. Thanks again for joining us. You may now disconnect. Goodbye.