Good evening everyone. Welcome to Xiaomi Corporation 2019 first half results conference call. I'm Steve Huang, the Director of Corporate Finance of Xiaomi. Before we start the call, we would like to remind you that it 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 Xiaomi. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, company's financial prepare in accordance with IFRS. Now, let me introduce the Senior Management on the call today. We have our Founder, Chairman and CEO, Mr. Lei Jun, our Senior Vice President and CFO, Mr. Shou Zi Chew, our Senior Vice President, Mr. Wang Xiang, who leads our international business.
Now, I will turn the call over to our CFO, Mr. Shou Zi Chew.
Good evening, everybody. This is Shou here on the line. Thank you, as always, for your support of Xiaomi. Today, I will go through a very quick recap of our first half and Q2 results. The second half of this call, I will hand the time over to Mr. Wang Xiang, our SVP of our global business, who will share some of our global progress review as well. I think in summary, this first half of the year, we will categorize it as very healthy operations, very healthy growth within Xiaomi. This healthy growth is reflected in a few areas. First of all, we have achieved very high-quality, healthy growth numbers in terms of our revenue. Second, our profitability has increased significantly. Third, we believe that our ability to manage uncertainty has increased a lot as well.
In terms of our first half 2019 results, our total revenue for the first half was RMB 95.7 billion, with year-on-year growth of 20%. Our adjusted net profit was at RMB 5.7 billion with a year-on-year growth of 50%. If you look solely at Q2 2019, our total revenue was RMB 52 billion, with year-on-year growth of about 15%. Our adjusted net profit was at RMB 3.6 billion with a year-on-year growth of 72%. We looked at the Bloomberg consensus numbers to get a view of what research analysts have predicted for the second quarter of this year. We believe that our Q2 revenue has met expectations and our Q2 adjusted net income has greatly surpassed expectations by 29.4%. Not long ago, we were very honored to be included in the Fortune 500 global list for the very first time, and our rank on this list was 468.
We were the seventh internet company globally to join this very prestigious list. From founding to today, it has only taken us nine years to join this very prestigious list. We believe that we are the youngest company on the global Fortune 500 list today. Xiaomi also made the BrandZ 2019 top 100 most valuable global brands ranking for the first time. According to this ranking, we were ranked number 74, and our brand value was estimated to be about $19.8 billion US. Xiaomi was also listed as one of the 2019 Forbes China's most innovative companies. We believe that these very prestigious awards is a recognition of the hard work that all Xiaomi employees have put in over the course of the nine years. This is also great encouragement for us as we work harder towards even bigger milestones in the future.
Now, before we dive into details, let me give you guys a quick recap on first half 2019. In terms of our company strategy, we launched the smartphone plus AIoT dual engine strategy in the first half of 2019. In terms of the smartphones business, we executed the successful separation of Xiaomi and Redmi brand, including inviting Mr. Lu Weibing to join us as our group vice president and head of our Redmi brand. We were ranked number four globally in terms of smartphone shipments in first half 2019. In particular, in Q2 2019, according to a particular third-party research firm, we were very close to becoming the third-largest smartphone company in the world. This is something that's unimaginable 10 years ago. We were number one in India for eight consecutive quarters in terms of smartphone shipments and number four in Western Europe with a year-on-year growth of 53%.
We also launched our first 5G phone in Europe this year, which is called the Mi MIX 5G model. Our second 5G smartphone will be launched in mainland China in the second half of 2019. In terms of our AIoT business, we had 196 million connected IoT devices, excluding smartphones and laptops, in the first half of 2019, of which we also have 49.9 million AI assistant MAUs, monthly active users. This is driven in part because of our strong TV and home appliances business. In terms of our TV business, we were number one in mainland China in terms of shipments and number five globally in terms of shipments. In terms of our large home appliances, we enjoy very strong momentum, which I will deep dive into later in this presentation.
In terms of our internet services, the first thing we have achieved is increased diversification of our internet services revenue, reflecting a more robust and healthy business in the future. Our Youpin e-commerce GMV reached 3.8 billion RMB, with a year-on-year growth of 114%. In terms of our overall financials, as mentioned, our total revenue for the first half was RMB 95.7 billion , with a year-on-year growth of 20%. Our adjusted net profit was at 5.7 billion RMB, with a year-on-year growth of 50%. Our cash resources at the end of the first half was at 51.1 billion RMB. This is a historic high for Xiaomi, including after comparing with the quarter after our IPO. We've achieved a historic high in terms of our cash resources. Our operating cash flow for the first half of 2019 was at 12.2 billion RMB.
Next, I will go into a bit more detail for each of our key businesses. First, our smartphone business. In the first half of 2019, our smartphone revenue reached RMB 59 billion, representing a year-on-year growth of 9.8%. In the first half of 2019, we sold approximately 60 million smartphone units around the world. This first half of the year, we executed the successful separation of the Xiaomi and Redmi brands. Just as a recap, the Xiaomi brand focuses on pioneering advanced technology, establishing itself in the mid to high-end and diversified user markets. It is also the brand that will help us build our new retail channels. In the first half of this year, we launched the RMB 2,000-RMB 3,000 price range flagship Xiaomi 9 series. This series has achieved widespread popularity among our users.
Following which, we launched the RMB 1,000-RMB 3,000 price range Xiaomi CC9 series, which targets young and female users, of which the Xiaomi CC9 Meitu model utilizes cutting-edge technology from Meitu with regards to photo quality, and we believe this brings our female users a very unique smartphone that is very good for selfies. In terms of the Redmi brand, the Redmi brand focuses and pursues the ultimate price-performance ratio and focuses on online channels. In the first half of this year, we launched the Redmi Note 7 series, which achieved incredible popularity across the world. We announced earlier this morning that our Redmi Note 7 series has sold 20 million units since launch. In the first half of 2019, we also launched the K20 series. In the first month of launch, we sold 1 million units of the Redmi K20 series.
This series also allows the Redmi brand to start pursuing more of the high-end markets in the ultimate price-performance ratio segment. By the end of the first half of 2019, the Redmi and Xiaomi brand series both have a comprehensive portfolio of products that covers a suitably wide price range. We believe that this will allow the separation of the brand to be executed more successfully as we progress towards the second half of 2019. As a result of our upgraded brand strategy and our optimized product portfolio, our average selling price of our smartphones has continued to grow. In the second quarter of 2019, our mainland China smartphone ASP grew by 13.3%, and our overseas smartphone ASP grew by 6.7%. Revenue from smartphones over RMB 2,000 has reached 32% of all our smartphone revenue in Q2 2019.
Over the course of the past few months, this number is going up. This year in June, something very monumental happened in terms of the smartphone market in China. The Chinese government launched the first 5G license for commercial use, and we have officially entered the 5G commercial use era. We believe that the Chinese smartphone market will grow with the proliferation of 5G smartphones over the course of the next few years. We are very optimistic and very well prepared to capture this growth in the future. In terms of our preparations for 5G, we started devoting R&D resources into 5G as early as 2016. By 2018, we have successfully connected our first 5G device to a 5G network. By February 2019, we launched our first 5G phone in Europe. This same model, Mi MIX 3 5G, was delivered to the 3 carriers in China in May 2019.
We will launch our first 5G phone in China in the second half of this year. Now, details of the launch event will be disclosed at a later date, but we will keep everybody informed of course. Now, as we enter this transitional era of 4G to 5G, over the first half of 2019, our emphasis is on prudent and healthy operations. I will share two numbers to show how we have executed this. First, our growth margins of our smartphones grew from 3.3% in Q1 2019 to 8.1% in Q2 2019, growing by 5%. I think this shows the robustness of Xiaomi's operations as a whole. Second, in terms of our operating cash flow, excluding our fintech business, we went from negative RMB 1.5 billion in Q1 2019 to positive cash flow of RMB 13.7 billion in Q2 2019.
We believe that having these significant resources at hand will allow us to better capture the 5G opportunities when they arrive very, very soon. Next, I would like to share a bit more detail on the AIoT business. Our IoT and lifestyle product revenue reached RMB 27 billion in the first half of 2019, representing a blistering growth of 49.3%. Here, I would like to share our thoughts on why our IoT business is unique and highly strategic. It fulfills four key strategic functions for us. First, our IoT offering allows us to empower more ecosystem companies to fulfill our mission to build amazing products at honest prices so that everybody in the world can enjoy a better life through innovative technology. This very complete product offering that we have attracts customers to our retail channels in a very efficient manner.
This is one of the key reasons why we have been able to keep our operating efficiency at such a high level compared with every single company in our space. Third, the highly popular products are connected to form a very unique consumer IoT platform, which is one of the largest, if not the largest in the world today. Fourth, it allows us to have a diversified revenue and profit stream. In the first half of 2019, our AIoT business was driven by many factors, including our smart TVs business, which reached 5.4 million units of shipment with a year-on-year growth of 65% in the first half of 2019. We were ranked number one by shipments in China and number five globally in the first half of 2019 in terms of TV shipments. We are the number one smart TV brand in India for five consecutive quarters as well.
We also have very strong momentum in large home appliances, of which our Mi air conditioner shipments reached 1 million units in the first half of 2019. Now, for those who are familiar with this space, this is a very important milestone to reach, and very few companies can reach it with such a short history of operations in the space. In terms of our laptop business, according to IDC, our mainland laptop China market share grew from 5.5% in the second half of 2018 to 8.7% in Q2 2019, representing a growth of more than 3% market share in just one year. In terms of wearables, we remain the number one in terms of wearable devices shipments in the first quarter of 2019. Second quarter numbers are not out yet.
Our Mi Smart Band 4 exceeded 1 million units of shipments in just 8 days since its launch on the 14th of June this year. What the strength of these products have done is that it has allowed us to build the leading global consumer IoT platform. Today, we have 196 million connected devices outside of smartphones and laptops, and this number has grown by 70% over the last year. We have 3 million users who use five or more IoT devices on Xiaomi's IoT platform, and this number has grown 79% over the course of the last year. Behind our IoT platform is our AI capabilities. Our AI speaker shipments exceeded 4 million units in the first half of 2019. Today, we have 49.9, close to 50 million AI assistant monthly active users.
One number that we want to share is that in June 2019, 45% of our AI speaker users used voice to control their IoT devices. Because we have built such a big lead in terms of connected IoT devices, we believe that in the AIoT era, we have built a very significant competitive advantage for our company. Third, I want to share a little bit more about internet services. In the first half of 2019, our internet service revenue reached RMB 8.8 billion, representing a growth of 23%. This is despite a challenging macro environment for the internet business, as many of you are aware. This growth is underpinned, first of all, by our strong MIUI monthly active user growth. Our global MIUI monthly active users has grown from 207 million in Q2 2018 to 279 million in Q2 2019, representing a year-on-year growth of 35%.
We would also like to share our mainland China MIUI monthly active user number. Today, our mainland China MAU number is at 115 million. Over the course of the first half of 2019, our Chinese smartphone advertising business has achieved increasing diversification. Over the course of the last few quarters, our advertisers have expanded from other internet companies to new verticals, such as small to medium business enterprises and large finance organizations such as the big banks. Apart from just diversifying our advertisers, we have also increasingly built new internet services within our platform. I would like to share a few numbers with everybody. First of all, we have built a very significant new feed business within our internet services. Our new feed business has over 71 million monthly active users on our phones today, and this number has a year-on-year growth of 31%.
Our newsfeed products are ranked number one in terms of monthly active users on our smartphone. We are also number one in terms of search queries on our smartphones. We have a few entry points for searches to take place on our smartphone, including our launcher search box, our browser, and our negative one screen, and our AI assistant. We believe that our leading position in newsfeed and in search queries allows us to better diversify our advertiser base in the future. This will allow us to build a more robust internet advertising business in mainland China, and this will allow us to capture even more growth when market conditions recover. In terms of our gaming revenue and gross profit, I would like to emphasize that our gaming gross profit grew from RMB 213 million to RMB 408 million over the course of the last year.
This represents a gross profit growth of 92%. The reason for this is because we have put in a lot of effort over the last year to optimize our gaming distribution efficiency. This is point number 1, and point number 2, there is higher revenue growth from content providers, which give us a high gross profit margin. Underpinned by these two things, we believe that our gaming business is healthy today. I talked about mainland China advertising and gaming businesses just now. Now, in terms of other internet services, including Youpin, including our fintech business, including our overseas internet business, and including our AIoT internet services business, we have achieved increasing diversification and growth from these revenue streams. Combined, they account for 36% of all internet service revenue for Xiaomi today. These four revenue streams combined has a year-on-year growth of 109% in the second quarter of 2019.
Youpin, for example, achieved RMB 3.8 billion GMV in the first half of this year, with a year-on-year growth of 114%. What is also very interesting is that 65% of GMV in June 2019 for Youpin was from smartphone users who are not using Xiaomi handsets, which means that Youpin has successfully transitioned into an internet app for all users. In terms of our fintech business, our fintech business underpinned by our consumer loan and supply chain financing business achieved revenue of RMB 1.4 billion in the first half of 2019. This is a year-on-year growth of 79%. In terms of our IoT services business, I'm going to use TV as an example here. We have 22.6 million monthly active users for our TVs to date, of which we have 3 million paid subscribers. They pay for multiple memberships, including video, sports, children, and education.
Some of these memberships we have designed ourselves, including buying content ourselves. Some of these memberships have successfully expanded to non-Xiaomi TVs. We are building an internet service business, that IoT internet service business that not only services our devices. In terms of our overseas internet services, we are continuing to build and strengthen our service offerings. Just to give everybody an example, our Xiaomi browser is now ranked number one on Xiaomi phones in India in terms of monthly active users. Our overseas ARPU has continued to grow rapidly with a year-on-year growth of 133% in Q2 2019. In terms of our entire overseas business. Our entire overseas business revenue continued to grow strongly with a year-on-year growth of 34% in the first half of 2019. This revenue stream now accounts for 40% of our total revenue.
Mr. Wang Xiang will go into more detail for this business very shortly, so I'll just go through the key highlights. For example, in India, we have been ranked for 8 consecutive quarters the number 1 smartphone brand in terms of shipments, and our market share in Q2 2019 was already at 31%. In Western Europe, we are ranked number 4 by smartphone shipments in Q2 2019, achieving a very high growth rate of 53%. In Spain in particular, we are now ranked number 2 in open market in Spain and growing rapidly. In terms of our overall financial performance, our hardware gross margin, due to our prudent and healthy operational strategy, has grown from 7.4% in Q2 2018 to 9.1% in Q2 2019. Our internet service gross margin has also increased slightly from 63% in Q2 2018 to 66% in Q2 2019.
Our operating expense remains very efficient and very stable. Our entire operating expense ratio in Q2 2019 was still below 9% at 8.8%. This is in spite of our R&D expenses increasing by 30% year-on-year in first half 2019, outpacing our revenue growth quite significantly. In terms of our balance sheets, our inventory turnover days has decreased to 53 days in Q2 2019. The strength of our balance sheet and our cash flow is reflected in this number. Our net cash generated from operating activities in Q2 2019 was at RMB 13.7 billion, excluding our fintech business. We have also done the following math. Our cash resources today at the end of first half 2019 was at RMB 51 billion.
The book value of our investment portfolio is at RMB 29 billion, and the book value of our campus, our offices, and our other real estate is at RMB 9.6 billion. If you take away our RMB 13.8 billion of financial debt, our total, I guess asset value as defined by what I just said, is at RMB 75.6 billion. We have enough resources to prepare us for the growth opportunities that will come when 5G becomes widely used. Speaking of investment, one very important thing that we have done in terms of investment is that we have expanded our investments into the Chinese supply chain. We have invested in 12 local supply chain companies, of which very fortunately, three of them are already listed on the new STAR Market.
The reason why we have done this is because we want to form key relationships with our key component suppliers in order to build a supply chain ecosystem, with the kind of strength that we have built in our consumer business. We believe that the work that we have put in over the last two years has already put us on the right path, and we will continue to invest to strengthen our ability to form meaningful R&D relationships with very important suppliers in the future. With that, I will end my portion of the presentation and hand over the time to Mr. Wang Xiang. Mr. Wang Xiang is our Senior Vice President of our global business, who joined the company one month before I did, four years ago.
He used to be the Global Senior Vice President of Qualcomm and is a veteran in the space. I'll hand the time over to Mr. Wang.
Thank you, Shou. I'm very happy to share this latest status of Xiaomi international business. Actually, let me start with the total addressable market for the global smartphone. Based on the Canalys number, there will be 1.3 billion smartphone market for year 2019. The Xiaomi international business will focus on the total addressable market, is about a billion units of a smartphone. The market is huge. In addition to that, actually, we are getting into a new space, which is a carrier-driven market. They are in Europe. Over 50% of the total smartphones sold in Western Europe is from carrier channels. This is a new space for us. After a couple of years effort, actually, we are right now in 80 plus countries in the region. Give you one example, in Europe we ship over 9.4 million smartphones.
In the entire first half of 2019, the total shipment from the international business is around 60 million units. We are in top five smartphone brand in over 44 different markets, including, just Shou mentioned India, we are number one in eight consecutive quarters. We are number one in several other markets in Asian countries. We have many number twos and number threes. We'll continue to add the new markets to the list. Another positive news or good news is we're not only in the developing market, now we are enter over 44 developed markets, which the GDP per capita exceed RMB 10,000. The growth from that market is huge. Based on the first half, actually, our growth is 64% year-on-year growth in those developed markets.
Another trend is our high-end device, our flagship device volume increased significantly. Actually, the first half of year 2019, we saw a 10 times growth year-on-year in the shipment volumes, and the activation number grow 700%. The example is, despite launching for just four months, the shipment volume for Mi 9 exceeded the entire life cycle of Mi 8. It's a very good signal for us in the flagship device level. Secondly, a very important thing is we call it hero model. In the first half of year 2019, actually Redmi Note 7 is a hero model, not only in China, but also in almost every country we entered. Redmi Note 7 is one of the best-selling products.
To give you one example, in comparison with the best-selling year 2018 device, Redmi Note 5, the shipment volume for Redmi Note 7 increased by 179%. The activation number increased by 175%. Redmi Note 7 is just an example. Our mid-range devices experienced a 37% year-on-year growth in terms of shipment volumes, a 50% year-on-year growth in activation numbers. Let's talk about the ecosystem product. Actually, we experienced the same. The Mi Band, actually also one of the best-selling ecosystem product internationally. As of July of year 2019, number of activations is close to the number of activations for the year 2018. The growth is significant. Also, in year 2019, actually, we focus a lot, we call it retail channel build-up. Actually, we focus on three areas, the online channels, the offline retail channels, we add a new channel, which is the operator retail channels.
We put a lot of efforts into those three channels. Also, let me talk about the mi.com first. mi.com is the main pillar of our e-commerce strategy. Currently covers over 29 markets. Nine of them are B2C sites, where users can directly purchase Xiaomi product from those nine sites, includes Hong Kong, Taiwan, India, Spain, Indonesia, Russia, France, Italy, and U.K. Also we have a steady growth for Spain mi.com since April Mi Fans Festival, experienced over 60% year-on-year growth. France mi.com experienced continuous growth in daily active users. Actually, the active user growth over 300% year-on-year. Let's talk about the offline retail. Actually, offline retail strategy has achieved notable results. We entered over 56 markets with 520 offline retail locations. We established over 50 key accounts. We call it key retailers. For example, in Europe, they are MediaMarkt and those kind of big retailers.
We build a very strong strategic partnership with them. Point of sales increased by 31%. Mi counters tripled in numbers. Mi Zones increased sevenfold. Let's talk about the carrier channel. In the first of 2019, we build a strategic partnership with almost every European carriers, includes Vodafone, Orange, 3, TIM, and Telefónica. We expected to have greater sales volume through these carrier partnerships in the second half of 2019. Let's move into marketing. We used a lot of social media to do our marketing. We operate five platforms, including all the popular global social media platforms, including Facebook, Instagram, VK in Russia, and others. Also, we run over 161 accounts in 63 markets. Now we have close to 40 million followers in those social media platforms, and over 27% year-on-year growth.
In the future, we have a plan for the future, for the second half and even more. The first thing is we continue to offer amazing product with honest prices to global consumers. Secondly, we will focus on Western Europe market in the second half year 2019. Also, we will continue to build our presence, our channels in other markets like Latin America and Africa. We are building our offices and the channels in those markets as well. Also, we definitely will build stronger partnership with more operators globally. We will increase the volume of flagship devices leveraged to increase our brand image. This is the plan for the second half and even beyond. This is a short summary of the international business.
Thank you, Wang Xiang . I think now we're open the floor for questions. We'll be taking the first question now.
Thank you. Ladies and gentlemen, we will now put for questions. If you'd like to register for a question, please press star one on your telephone. Thank you. Our first question comes from Leping Huang with CICC in Hong Kong. Please go ahead.
Okay. Thank you to take my questions. I think two questions about smartphone. The first thing is that you deliver a flattish volume in this quarter, year-over-year, but if you look the IDC numbers, your China volume actually declined by 19%. What is the shift of the market dynamics these days of your market position in China and outside China? Yeah, thank you.
Thank you everybody for attending our analyst call today. Today, the market overall is very challenging. First, there is a lot of uncertainty that has arisen from the trade talks between China and the U.S. Second, this is the early days of the transition to 5G. We expect 5G to have explosive growth starting from Q2 2020. The global smartphone shipment market is shrinking right now. Our global shipment in Q2 2019 was flat from last year. Well, in a market that's falling, it means that we are actually growing. Our smartphone revenue grew by 9.8%. I believe that in Q2 2019, we have achieved very robust results in a challenging environment. In Q2 2019, our adjusted net profit was at RMB 3.6 billion. This has exceeded some estimates by almost RMB 1 billion. Our operating cash flow in the second quarter exceeded RMB 13 billion.
We put in a huge amount of effort to increase our operating efficiency, and our entire health of our business has improved very significantly. He is personally very satisfied with the performance of our Q2 numbers. After nine years of very explosive growth, Xiaomi needs a period of time of adjustment in order to elevate our core competence to a higher level. For example, we are increasing our R&D spending by a very significant amount. Last year, we spent RMB 5.8 billion in R&D. In the first half of 2019, our R&D expense has continued to grow at 30%. In a difficult macro environment, our most important things are to make sure our operations are healthy, increase our operational efficiency, and increase our core competence in the key areas that matter.
就是明年从云商来看，都会手机厂商进来的上新手机是一个非常好的机会，包括我们公司上市到明年两周年，一般手机两周年的话，都会有一个比较好的产品出来，这是一种看法。还有一种看法就是，因为5G的时候，我们是要依赖第三方的芯片供应商，但是我们的竞争对手他是用自研的芯片，相对来说产品开发的速度不一定会有大家那么快，对竞争对手那么快。怎么看就是明年上半年就5G起来，对我们公司是一个机会呢，还是一个挑战？
My question is that whether the 5G smartphone is the opportunity or the challenge for Xiaomi, because we see that on the positive side, we see the market will recover driven by this 5G cycle. On the negative side, because Xiaomi mainly rely on the third-party chipset, but the competitor rely on their own chipset. Maybe you have a lagging behind your competitor in terms of R&D of the product cycle. Thank you.
总体来说，5G对小米，对任何一家手机公司既是机会也是挑战。
The 5G opportunity is an opportunity and a challenge for every single smartphone maker in the world today.
我个人觉得对小米的话，机会远大过挑战。
He thinks that the opportunity for Xiaomi greatly outweighs the challenges.
小米为了今天的发展，我们16年就开始投入5G手机的预研。
We started investing in 5G R&D starting from 2016.
我们今年2月底在欧洲发布了第一款5G手机。
We launched our first 5G phone in Europe in February this year.
我们
All the carriers are using our device in Europe.
我们预计九月份在中国发布第二款我们小米的5G手机。
In September this year, we will launch our second 5G phone and the first 5G phone for the Chinese market.
我们对5G手机充满了信心。
We are very confident in our ability to compete in the 5G era.
所以，我个人觉得5G会带来整个中国新一轮的换机潮。
5G will bring about a whole new replacement cycle in China.
所以这一点我非常乐观。
He's very optimistic about this.
当然，5G大规模爆发的前夜的话，这个时间点很难把握。
What is difficult to gauge accurately is exactly when will 5G be greatly proliferated.
每一次通信技术的换代升级的过程中，总有一些厂商会掉队。
Every time there is such a major change in technology, some device makers will fall behind.
这就是小米面临的风险。
This is the challenge that we face.
我们管理层对这个风险有高度的认知。
Our management is very aware of this challenge.
我们几乎每一次会议都讨论跟5G相关的话题。
We talk about this at almost every single of our senior meetings.
此时此刻的话，我觉得我们充满信心。
At this point in time, we are very optimistic and confident.
Thank you.
See you later.
Thank you. Our next question comes from Piyush Mubayi with Goldman Sachs in Hong Kong. Please go ahead.
Thank you for taking my question. I've got two questions. First on the MAU that you announced for China of 115. Could you just explain to us where you were a quarter ago? Second, related to that, how do you think this will grow through the rest of the year in a market where smartphone growth rates within China have been under some sort of pressure? The second question related to smartphone business itself is, while I understand 5G launch takes place potentially with earnest in the second quarter of 2020. Between now and then, what is your expectation for market share gains? We understand the market's under pressure, etc. What is the expectation for market share progression from here till first quarter in 2020 or second quarter 2020?
Related to that, when I look at smartphone numbers across the world where you've done quite well, could you just describe to us how you've made progress with internet revenues in other parts of the world? Thank you.
Piyush, this is Shou here. I will respond to the internet questions first, and Lei Jun will respond to the smartphone market share question shortly after. Our MAU in China, this is the first time we're disclosing this number, is that 115 million at the end of Q2 2019. In response to your question, this has remained stable over the last quarter. In response to your third question, in terms of our internet services business outside of China, first of all, this revenue stream continues to grow very well. Our ARPU for our overseas user base has grown by 133% over the course of the last year. This is underpinned by a few things. It really is underpinned by how many services we're providing to our users. Now, I shared the example just now of our browser in India.
You may be aware that outside of China, we preinstall other browsers. For our own browser to be number 1 in terms of MAU in India, it's a great accomplishment and recognition of the service that we have provided our users. The browser comes with the search bar. It comes with the possibility of going to Newsfeed, which again, are the two services I talked about just now. It allows us to capture internet services revenue in a way that we cannot capture today. We are very optimistic about our ability to do this all around the world. That's my response to the internet questions. Lei Jun will now talk about market share.
Okay.
We haven't disclosed externally on our market share expectation for the future. He's very confident now that our market share will be increased from our position today. In order to make sure that we are well-equipped to handle the 5G war. Three months ago, he personally became the president of our Chinese business. He personally is now reorganizing our talent pool, including recruiting top talent to join in preparation for the 5G battle. Today, he spends two-thirds of his time in the China region. He can feel that the spirit of the Chinese team is increasing rapidly. On the 29th of August this year, we'll be launching Redmi Note 8, which is the sequel to the very successful Redmi Note 7. The launch of this device will display our improved capabilities to the external world.
Okay, next question, please.
Thank you. Our next question comes from Karen Wong with Credit Suisse in Hong Kong. Please go ahead. Thank you for taking my questions. Ladies and gentlemen, please stay on the line as our management line is being disconnected. We will resume as the speaker's line is back online. Thank you.
Dropped the line. Please continue on the question.
Yeah. Okay. I wanted to ask in English again. Okay. We wanted to track the breakdown for the gross margin improvement in the smartphone business in the second quarter. Given the severe competition, how much is contributed by product mix, regional mix, and also supply chain management? That is for the first question. Thank you.
Give me a moment to translate. Hold on, please.
He believes that 8.1% gross margins for smartphones is a normal number. This is something that is normal. In Q1, we were adjusting our product mix and optimizing our channels. Because the market conditions are tough, we are making sure that increasing operational efficiency is our key priority. He expects that our gross margin will stay at this level for some time. We need to make sure our pricing remains extremely competitive in the market.
Okay. My second question is actually, I want to ask how to deal with the other peers' aggressive move in the AIoT, along with the strategy of 1+8+N and also leverage their chipset and also OS platform. Thank you.
For AIoT, we started building this business six years ago, we have built such a big lead that we think this is the basis of our competitive advantage today.
在这里面我们有几个制高点。
We have a few very key milestones we want to share.
第一个，我们的AI系统小爱同学的月活跃4800万人，4900万人，这个数字是遥遥领先的。
First of all, our AI assistant is at 49.9 million MAUs. This is a very big lead across our industry.
我们花了非常多的钱在AI系统的研发上，其实这些都还没有变成利润。
We have spent a lot of R&D resources on our AI capabilities, none of which we are monetizing today.
第二个制高点就是IoT设备里最重要的电视，我们已经成了中国第一，世界前五。
Second, one of the most important IoT devices, televisions, we are number one in terms of shipment in China and number five in terms of shipment globally.
我们笔集的市场份额也全部上来了。
Our laptop market share is also at more than 8% today.
所以第一点是我们在这个战略上定得早，推动得很坚决。
In terms of this strategy, we started early and our execution has been very resolute.
为了应战有方。
In order to compete with our peers.
去年年底我们做了这样三件事情。
We did three things last year.
第一件是我们确定了手机加AIoT双引擎战略，并且决定了在未来五年投资100亿人民币，增强我们的AIoT的竞争力。
First thing, is we elevated smartphone plus AIoT dual engine strategy as our key strategy over the next few years. We are also going to devote more than RMB 10 billion of investment to support this strategy.
第二件事情，我们成立了小米集团AIoT战略委员会，专项负责AIoT业务的推进。
Second, we established the AIoT committee within our company in order to push ahead with the AIoT strategy.
第三条的话，我们专门成立了IoT平台技术部，抽了300个工程师。
We established a IoT platform technical team and have 300 engineers working on it today.
过去六年时间，我们虽然没有做芯片，但是我们是最早做module的，做组件。其实这个module是我们发明的，我们是做module的，就是把芯片封装在module里面。这套想法是我们最早开始的，这样我们可以跟世界上所有最优秀做芯片的公司一起来看IoT module。
Although we don't make our own chipset today, but we were the first company to create our own module many years ago. Our module includes a chipset inside, and we can work with any chipset manufacturer in the world to push ahead for AIoT strategy.
您知道有多恐怖吗？五六年前的时候，市场上的module是65块人民币。
Five to six years ago, the modules you buy in the market will cost you RMB 65.
我们加入这个竞争以后，现在只要9块钱人民币。
After we entered this industry, they now only cost RMB 9.
只要9块多钱就可以把你的电视、空调、冰箱、洗衣机、台灯、所有开关全部变成智能化。这就是小米对整个行业巨大的贡献。
With just RMB nine, you can buy a module that can connect your air conditioning unit, your TV, your light, any device that you want onto our IoT platform.
五年前我们没有选做芯片，但是我们选做了module、线路式操作系统和云服务和控制中心，四个点一起出发。
Although we didn't create our own chipset years ago, what we did was we created our own module, our own operating system, our own control system, and our own cloud services in order to push forward our AIoT strategy.
这就是我们。我们认为在IoT整个策略上，小米依然保持了非常进取的态度来推进。
In terms of the AIoT strategy, we believe we are very resolute and we are leading in terms of our strategy execution.
Thank you. Thank you. Our next question comes from Frank Tao with HSBC in China. Please go ahead.
Ladies first. 各位分析师大家好，感谢你的提问。那么现在我想问第一个问题是关于我们在网络游戏这一块的毛利率提升的这样一个趋势，因为同比增加了将近30%的这样的毛利。那想问一下这里面是一个可持续的情况，还是有一些特殊的一些游戏，或者说是代理渠道的一些变化。So my first question is about the gross margin on the online game in the internet service segment. We see almost 30 percentage point increase on a year-over-year basis.
Just wonder if there were any one-off impact from certain games titles or any other reasons behind that.
Frank, let me explain this. There are two reasons why our gaming gross margin has improved year-over-year. This is work that we've done over the last few quarters. One, we have reduced our reliance on sort of low efficient distribution partners. We just stopped using those. We just overall made sure that the operating efficiency of our gaming business went up. The second important reason is that there are one or two gaming partners who, in terms of revenue recognition, we recognize the net revenue, the net take rate from them, and not the gross take rate. There are only one or two partners. One of them is Tencent. Their Q2 growth was significant.
Okay, got it.
Make sense?
Yes, very clear. My second question is about the fintech business. We see very strong growth in this fintech revenue, and I just wonder what kind of commitment or plans we have to keep driving the growth. Also whether there are any synergies between our existing IoT and the smartphone platforms.
Okay. Frank, there are a few things here. One, our fintech business mainly revolves around supporting our core business. For example, our consumer financial business services Xiaomi users. This is the first thing. Second, our supply chain financing business services supply chain partners of Xiaomi. This is a highly regulated industry. We are highly compliant with all the rules and regulations of the industry, and we believe that, number one, being compliant with regulations, and number two, servicing Xiaomi and Xiaomi ecosystem is enough to grow the business to a significant scale. You are seeing sort of the early to mid-stages of this expansion.
Okay.
Okay.
Due to time constraint, we'll take the last question. Operator, please.
Thank you. Last question comes from Gokul Hariharan with J.P. Morgan in Hong Kong. Please go ahead.
Yeah, thanks for taking my questions. First of all, could you talk a little bit more in detail about what you're planning to do in Western Europe? What is the engagement levels that you're getting from the telecom carriers? Especially given one of your competitors has faced a tough time in the European market in the last several months. If we engage more closely with telecom carriers, what does that do from a margin profile perspective? Is it similar margins compared to the open channel kind of markets that we have? I had one follow-up question on the internet services as well.
Yeah. Thank you for the question. Actually, we are start building a partnership with the major European carriers. I think that's the strategy. Actually, we can offer very highly sophisticated devices with affordable price, that will help the carrier to lower their cost and serve more consumers. That's why the global carriers also like us. In terms of the margin, actually, we are working with the carrier to optimize the channel cost, so that we can have a better offering for the carrier retail channel as well. I think this is what we do right now. We see significant attraction from all the carrier channels in Europe.
Okay. Just one follow-up question on internet finance, fintech businesses, Shou. Could you give a little bit more detail, given now it's almost high teens % of internet service revenues? How is the breakdown of the loan balances between consumer and supply chain? Is there any payments business in there, or is there any international business in there right now?
Gokul. The majority of the fintech business right now in terms of loan portfolio is the consumer loan business. The way this business is conducted is that, obviously compliant with all the privacy rules that we need to comply with, the user allows us to run a credit score for him or her. Based on this credit score, a certain risk profile is allocated and a certain amount of loan with a certain interest rate is given to the user. All these are compliant with rules and regulation. Supply chain financing today revolves mainly around our accounts payable. The amount of money that we need to pay to our partners, we give them a credit score based on the financials they provide, based on the historical data and the historical transactions that we do together.
We can pay them slightly in advance, and there is a cost associated with that. These are the two components of our fintech business today, with consumer loan being the majority.
Okay. Thank you very much.
Thank you all for your time tonight. We'll be closing the call now. Thank you.
Thank you.