Good evening, everyone. Welcome to Xiaomi Corporation 2019 First Quarter Results Conference Call. I'm Steve Lin, 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 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 company's financial prepared in accordance with IFRS.
Now joining us on the
call today are our Founder, Chairman and CEO, Mr. Lei Jun Senior Vice President and CFO, Mr. Shou Zixou and today, we also have Vice President and Managing Director of Xiaomi India, Mr. Manu Jain and Vice President and Chairman of Technical Committee, Mr. Cai Bao Qiu.
Now, I'll turn the call over to Mr. Good evening, everybody, and thank
you very much for joining us on this call. In the next few minutes, myself, Manu and Doctor. Cui will walk us through some of the key highlights for Q1 2019, and then we will follow-up with Q and A session with everybody. As always, thank you for your continued support of Xiaomi. First of all, in terms of financial highlights for Q1 2019, our total revenue for this quarter was RMB43.8 billion, achieving a year on year growth of 27.2%.
Our adjusted net profit was RMB2.1 billion, achieving year on year growth of 22.4%. We believe this has met our internal expectations and is slightly above Bloomberg consensus. Q1 2019 was the 1st quarter that Xiaomi and Redmi were operated as independent brands. As many of you may remember, Redmi is focusing on finding the optimal price to performance ratio and with a focus on online channels, while Xiaomi brand will continue to focus on innovation and bring the most extreme to our users. After a period of calibration in Q4 2018, where we launched Mi Mix 3, we launched a series of new smartphones in Q1 2019.
First, starting from Redmi, we launched our Redmi Note 7 handset in January 2019, followed by Redmi Note 7 Pro and Redmi 7 in March 20 19. All these phones enjoyed great pen fare and reception from our users globally. As of the end of Q1 2019, our Redmi Note 7 series phones had achieved shipment of over 4,000,000 units. As for Xiaomi, we launched our flagship phone Xiaomi 9 in February 2019. Now this is a phone that has a lot of cutting edge technologies, pioneering the way for a lot of innovative use cases.
For example, it has fingerprint on display. It has a 48 megapixel triple camera and 20 watts quick charge, supporting including wireless charging. Xiaomi 9 series was also very successful. And at the end of Q1 2019, we had already supplied 1,500,000 units of Xiaomi 9 Series phones with shipment achieving 1,500,000 units shortly after in April 2019. Now as a result of this multi multi brand strategy and as a result of the collective hard work of all Xiaomi employees, our Mainland China smartphone market share increased every single month in Q1 2019 according to a third party research analyst.
Now apart from smartphones, we also announced our smartphone plus AIoT dual engine strategy earlier in 2019. Today, we have the leading global consumer IoT platform. Our connected device excluding smartphones and laptops has reached 171,000,000 devices. This is a year on year growth of over 70%. Today, more than 2,600,000 users have more than 5 Xiaomi IoT devices excluding smartphones and laptop.
1 of the most representative products of the AIoT era is the AI speaker product. As of the end of March 2019, we have over 10,000,000 accumulated AI speaker shipments. According to Catalyst, in Q4 2018, our AI speaker shipments was number 2 in China and number 4 globally. Today, our AI assistant Xiaitongxia has 45,500,000 monthly active users. The focus that we will put on is improving user experience and creating more smart home use cases.
For example, in our recent smart TV launch event in China, we displayed the possibilities of using all our devices when they seamlessly connect and create experience use cases with each other. For example, if you are using our smart doorbell and our smart TV, if you are watching TV and someone rings the doorbell, the image from the doorbell can be projected onto your TV. And this is actually this is very convenient. We have created and we'll continue to invest on creating more smart home use cases as we feel we have the responsibility to pioneer them. Today, our AI assistant has more than 1400 skills.
In a little bit, we will invite Doctor. Cui, our Head of our Technical Committee to give everybody an update on our overall AI roadmap as well. In terms of our international business, we are now ranked top 5 in more than 40 smartphone markets globally, of which the market that over the last few years we have experienced very fast growth globally, but our focus is to be sure that we build our own deep capabilities in many of the key markets. And today it is a pleasure to have Manu Jain, Vice President and Managing Director of Xiaomi India to share with you more information. Just to give you an introduction on Manu, he has a Bachelor's degree from IIT Delhi, an MBA from IIM Calcutta, worked at McKinsey for a number of years before starting his own fashion e commerce company, Japaul.
Manu joined us almost exactly 5 years ago, and he is the most senior employee in terms of time in Xiaomi India. So let me turn over
the time to Manu. Thank you, Shu. Hi, everybody. This is Manu here. So it's my great pleasure to be here today with all of you guys.
So as Shao mentioned, Xiaomi India journey started about 5 years ago in July 2014 when we launched the first in the country. We have launched 8 categories in
India till now, and we are
already number 1 in
4 of these categories. So today, we are the largest brand in the country across smartphones, smart TV, fitness wearables and power banks. Let's talk about each one of them. The first one is smartphones. So now we have been number 1 for 7 consecutive quarters.
We became number 1 in exactly 3 years from when we launched. We launched in Q3 2014, and by Q3 2017, we had become the largest brand in the country. And for last 7 quarters, every single quarter, we have been the largest or number 1 brand in the country. If you look at the IDC numbers for year, which is entire year 2018, IDP estimates that we shipped more than 40,000,000 devices, and we had about 29% market share in the country, while Samsung, which is the number 2 brand, shipped about 32,000,000 devices and had about 22% market share. Not just we were the not only we were the largest brand in the country, but we were also the fastest growing smartphone brand amongst our top 5 brands, and we grew at a whopping 58% year on year from 2017 to 2018.
Again, this Q1, we were the largest brand, and this time, we crossed the 30% market share, and we had approximately 31% market share in the smartphone industry in India. And we were 36% bigger than the 2nd largest brand, which was Samsung, and we were 133% bigger than the 3rd largest brand in the country, which is VeeVee. Now we started building our business 5 years ago in online. And for the 1st 3 years, we were mainly focused on the online segment, and we had literally spent almost close to 0 marketing dollars. Now in the online segment, we have been number 1 brand for 10 consecutive quarters.
And if you look at the entire 2018 data from IDC, we had a 51% market share, which means if there are 2 people who go online and buy a smartphone, 1 out of 2 are Xiaomi customers. And there was a huge difference between us and the 2nd or third largest brand. We were about 7x bigger than the 2nd largest brand in the online segment and about 8x bigger than the 3rd largest brand in the online segment, which are Realme and Samsung. 2 years ago, we realized that online is about onethree of the market, and we already have 50% market share over there, and we started building our offline channel. And we have seen an exponential growth in our offline business also.
In a short period of 2 years, from Q2 2017 till end last year or beginning of this year, we've already grown from less than 3% market share within offline segment to more than 20%. So let me just reiterate. So we have 20% market share in offline, 50% market share in online and overall India online plus offline put together about 31% market share. We have been entering many new categories. For example, smart TVs, we just launched it last year in February 20 18.
And within 6 months, we became the number 1 smart TV brand in the country. And for last three quarters, every quarter, we have been the largest smart TV brand. Today, we have about 34% market share within the smart TV category versus LG having 17%, Sony 15% and Samsung 13%. So we're almost 2x because of the 2nd largest brand within the smart TV category. In wearables, we have Mi Band.
We sell 2 different variants, Mi Band 3 and Mi Band HRX, 2 products in India. And we have a whopping 41% market share. And we are more than 2x bigger than the 2nd largest brand, which is an Indian start up. We are more than 2x bigger. Now while we are selling a lot of these devices, many Indian customers really worry about after sales service a lot.
And so we have also built an extensive service network where we have more than 1,000 service centers, and our after sales service has been rated as the best in class service network across the country by 3rd party reports. While we are building our entire hardware business, we are also focusing on building our Internet revenue, Internet business in the country. If you look at just last 12 months, which is 1 year, we have already launched 3 very successful apps: Mi Music, which is streaming platform Mi Video, which is a video streaming platform with more than 700,000 hours of content and recently, just about few weeks ago, we launched our payment platform, which is based on UPI Stack, and we are calling it as UPI. So we are building our hardware business, we are building our business, off and retail business, and we are building our Internet services in India.
Thank you, guys. Thank you, Manu. As we mentioned earlier in the 2018 full year report, smartphones plus AIoT is a dual engine strategy that we are taking out that is going to propel us going forward. And today, it is my great pleasure to also introduce Doctor. Cui Baoqiu, our Vice President and Chairman of the Technical Committee of our group.
Doctor. Cui has a PhD in Computer Science from State University of New York at Stony Brook and has 20 years of engineering in LinkedIn, Yahoo! And IBM. He joined Xiaomi 7 years ago and was previously in charge of our AI, Big Data and Cloud Computing business. So let me turn the time over to Doctor.
Zhu. Zhu Yi?
Okay. Thank you, Xiaop. Good Committee of the Group. Before I took this new role earlier this year in February, I was the Head of Artificial Intelligence and Cloud Platform team responsible for AI, Big Data and Cloud platform. So starting from this year, my role was switched to technical committee and this is a AIoT.
What's AIoT? And this new term was coined in China in 2017. Around that time, companies like Alibaba and Xiaomi started to talk about AI plus IoT. In short word, it's AIoT. Why AIoT was so important the only answer to a lot of users' questions, 2 questions, why Xiaomi is an Internet company, why Xiaomi is a technical company.
To me, this is the best answer to answer 2 of these questions. So after the technical committee was formed officially late February. We did a lot of things. Now, one of the early tasks we did was to draw a clear and very detailed map of Xiaomi's technology inventory. This is the very first time for this group.
After we draw this map, we can clearly see where we are in terms terms of everything. So, we categorized all technology that we do in the company into
in
categories, including industrial design, OS, security and privacy, big data, communication technology, cloud technology, application and services, artificial intelligence, hardware and drivers. And among each of these categories, 100 secondary categories. 100 secondary categories. So after we saw this map, it's very clear that we hold leading positions in industry design, operating system and security privacy protections. And also, we have strong capabilities in artificial intelligence, big data and cloud technology.
In the areas of communication technology, hardware and drivers, application and services, we need more heavy investments. So recently, according to chineseniki.com website, Xiaomi was ranked as 11th in terms of number of AI patent applications. This is a global globally ranking. And we are behind Alibaba who was ranked as 10th 10th and Huawei is ranked after Xiaomi 12th. So we also did a study in the patent portfolios of the company in the IoT, AI plus IoT.
And zooming into this map, we can see the strength of what we accumulated in the last many years. And we can see all the thoughts around AI technology, IoT platform control and applications, speech technology that's powering Xiaifengxue or smart assistant. Committee is heavy and but I think the future of Xiaomi is bright and we after 9 years of early stage, we officially went into a new era relying on technology. Thank you. That's all my
Okay. Thank you very much, Doctor. Cui. In the following section, I will go through some of the key financial highlights in a little bit more detail. I will start with our smartphone business.
Our smartphone revenue reached RMB27 1,000,000,000 in Q1 2019, representing a a growth of 16.2 percent year on year. As of Q1 2019, we sold 27.9 1,000,000 units of smartphones. And we have already gone through sort of the launch dates of all these smartphones. And it is the new portfolio of products
of
reached 30% and in international markets, our ASP growth reached 12%. Now because the series of new products was launched throughout the Q1 of 2019, there was also a period of change between our old portfolio and new portfolio, particularly in international market where the timeline for this particular set of products was about 1 to 2 months behind. In terms of our IoT and Lifestyle products, our IoT and Lifestyle products revenue stream reached RMB12 1,000,000,000 in Q1 2019, representing a year on year growth of 56.5%. So we have maintained a very fast growing IoT and Lifestyle revenue business. Now this is part of it is driven by our smart TV sales volume, which reached 2,600,000 units globally in Q1 2019.
This is a growth rate of 99.8% year on year, almost 100%. And for the 2nd consecutive quarter, we were ranked number 1 in China by smartphone smart TV shipments. Now this was also a quarter where we continue to launch many killer IoT and Lifestyle products. This includes my personal favorite, the Mi photo printer, the Mi smart door lock, envision that we will continue move into the second half of twenty nineteen, we have vision that we will continue to launch killer products that will continue to attract our fans to our me.com, our me homes and our Yopine e commerce website. Now in terms of Internet services, Internet services reached RMB4.3 billion in Q1 2019, representing a year on year growth of 31.8%.
Now as many of you on this call will know, there is a slightly challenging macro environment in terms of the advertising market in China today. But despite this, we managed to achieve a 31.8% growth. This is to achieve a 31.8% growth. This is underpinned by our strong MiUI monthly active user growth. Our MiUI monthly active user has reached 260,900,000 users globally, while our Mainland China MiUI monthly active users achieved a quarterly quarter on quarter growth in Q1 2019.
The health of our Internet services business is driven by 2 layers of diversification of our Internet services revenue that's ongoing right now. The first layer is that 32% of our Internet services revenue is now from Internet services outside of gaming and advertising from Chinese smartphones. And this revenue streams combined achieved
a
It includes Internet services revenue from TV and other IoT products, from our international markets, from our European e commerce and from Internet finance. The second layer of diversification going on for our Internet services revenue is that our mainland Chinese advertising revenue for the last number of years due to its fast growth was primarily serving the Internet sector. Over the course of the last few quarters, we have diversified this into new verticals, including in education, in certain parts of FinTech, in e commerce and in certain types of games. And the result of this is a healthier and more diversified Internet services revenue stream that has managed to grow in a a the course of the last few years, our international business had grown very, very rapidly. In 2019, there will be a strong focus in making sure that we build out not only smartphones but also other products, build out our retail capabilities, particularly offline and build up our Internet services revenue stream from key markets outside of China, including India.
Just to share a set of numbers outside of India. We are ranked number 4 for smartphone shipments in Western Europe in Q1 2019, achieving a year on year growth of 115%, which are in the top 4 in terms of smartphone shipments for Western Europe is by far the fastest. Now moving on to our margins. In Q1 2019, as we mentioned just now, due to the calibration of our product portfolio over the last two the international markets. As a result of this, our hardware gross margin, in particular, our handset gross margin declined as we were promoting our old products to pave the way for the launch of our new product in overseas smartphone gross margins has overseas smartphone gross margins has rebounded.
In terms of Internet services gross margin, our Q1 2019 Internet services gross margin reached 67.4%. The increase is primarily driven by the increase in gaming revenue, which has a higher gross margin profile. Moving on to operating expenses. We as probably all of you know on this call, Xiaomi is a company that prides itself on extreme operating efficiency. We are pleased to say that in Q1 2019, our operating expense as a group was still below 10% at 9.4%.
Now despite this, our R and D expenses reached RMB1.7 billion growing almost 50% year on year. So with revenue growing at 27% and R and D expenses growing at 50%, we are continuing to invest in our core capabilities in order to have long due to seasonality had a cash outflow in terms of operating cash flow, we made it a point to note announcement that this was due to seasonal factors. Now in March April, because in January February, there's a very special Chinese New Year celebration across the most important country where our supply chain takes place. In March April, our operating cash flow was actually a net cash inflow. So overall, we think that our company is in a very healthy cash flow state.
Now in terms of inventory, we want to point out that our total inventory has declined from RMB29.5 billion at the end of Q4 2018 to RMB26 1,000,000,000 in Q1 2019. In particular, particular, our smartphones finished goods inventory declined from RMB13.4 billion to RMB9.9.2 billion. Overall, state. Now last point on our financial highlights. As many of you know, over the course of the last many years, Xiaomi through strategic investments has invested in over 2 70 companies to help strengthen our business relationships with these investing companies.
A lot of them have been very successful from a strategic and financial point of view. For example, Huami, which makes our smart band for us, our wearables for us, contributes a significant portion of our wearables revenue, is a very successful wearables company in itself and has generated a significant amount of investment return for us. Today, our investment book value is already at over RMB29 1,000,000,000 with a year on year have gone public in many, many different store exchanges around the world. In 2019, there is a strong pipeline for a number of these companies to go public as well. As a result, we believe that we will have the potential to generate recurring investment income going forward.
In Q1 2019, after taxes, we generated a net gain of RMB590 1,000,000 in investment income. This ends the brief report that we have before we open up the Q and A. I would like to thank you for again your attention. And if I can turn it over to Steve to host the Q and A session. Steve?
Thank you, Shu.
We will now open the floor for questions.
Thank you. Ladies and gentlemen, we will now poll for questions. Thank you. Our first question comes from Leipeng Wang with CICC in Hong Kong. Please go ahead.
The first time Xiaomi's revenue exceed RMB 3,200,000,000. So I would like to know what's the your plan on this
large haematized business? Thank you.
Thank you for the question. First of all, our major appliances business is a very important part of our AIoT plus smartphones dual engine strategy. We believe that with our experience with smart TV, we have formulated a playbook to help us succeed in other major appliances appliances categories, including air conditioners and washing machines, not only in China, but also around the world. So over the period of the next few years, there will be a significant amount of management bandwidth and investment that we will dedicate to major appliances.
Okay.
The second question is that I think the major discussion these days in the smartphone supply industry is the your peer, Huawei, is included into the entity list on the U. S. Department of Commerce. So what's your I mean because you also purchase a lot of components from U. S, so how you make sure that the business continuity of your supply chain safety?
Thank you.
Thank you for the question. We have seen the recent news, and this is clearly an issue that is that we are very focused on at this point in time. At this point in time, we can share that these series of events has no direct impact on our business at this point in time.
Okay. Thank you. Next question?
Thank you. Our next question comes from Grace Chan with Morgan Stanley in Hong Kong. Thank you.
Yes. Sure. Thank you. Thank you for My question is about our flagship model, Mi 9. Is it great if the management can update us with the latest shipment momentum and the outlook we project?
And also, component supply situation right now in the competitive landscape? And also, if you can talk about the contribution from this model specifically to our Q2 and Q3 numbers, that would be great. Thank
you. Okay. Thank you, Grace. Regarding Mi 9, we launched Mi 9 on the 20th February this year. And the reception from our users is very great and this is a phone that is in high demand.
As we disclosed, at the end of Q1 2019, we had already supplied 1,500,000 units of Mi 9. And shortly after in April, in early April, we have already shipped 1,500,000 units of Mi 9. Mi 9 is of our dual brand strategy. It is the Xiaomi brand which will focus on extreme user experience. Now we will continue to monitor its progress.
Right now, it's doing well. Now of course, at the end of this month, on the 28th May, we will be launching our Red Knee flagship called K20. And when the details of this device is out, we will share that we share with everybody in this group. Generally speaking, although there is a little bit of pressure in terms of global shipments and Chinese shipments of smartphones as the industry awaits the dawn of 5 gs, gs. Our performance in Q1, I think, shows that we are still outperforming the market.
Thank you. Next question, please.
Thank you. Our next question comes from Robert Cow with 86 Research in China. Please go ahead.
Hi, management. Thank you for taking my questions and congratulations I first want to ask about the gross margin. The Q1 was a little bit soft. I'm wondering going forward, how does the VAT impact your gross margin? And also how should we think about the gross margin as we move through this product cycle?
Thank you, Robert. In terms of our growth hardware gross margins, as I described just now in the earlier part of the call, Q1 2019 was the quarter that after a quarter of calibration of our portfolio, we've actually launched a number of smartphones, including Redmi Note 7 in January, Mi Mix 5 gs in February, Mi 9 in February, Redmi Note 7 Pro and Redmi 7 in March. Now this launch events were happening in China and also in many other international markets. But in the international markets for this portfolio, there was a lag. So in preparation for the launch of these new products, we did a series of price promotions to ensure the successful launch of the new portfolio.
So the decline in gross margins, particularly smartphone gross margins in Q1 was due to decrease in gross margins in international markets. Now as of April, with almost successful completion of a lot of these products, which is our gross margins for smartphones in international markets has rebounded. Now in terms of the VAT cut, generally speaking, as mentioned, although the smartphone shipment market in China is relatively soft today, we are generally optimistic about this VAT cut. According to public sources, this is a RMB2 1,000,000,000,000 fiscal stimulus, everything combined, not just the VAT card. And this VAT card directly impacts us because we are part of the list of manufacturing companies that benefits from the 3 percentage point reduction in VAT.
Now a part of it will eventually spur increased consumption. A part of it will flow down to us and our suppliers. Generally speaking, this is a piece of positive news for us.
Thank you. Next question please.
Thank you. Our next question comes from Gokul Hariharan with JPMorgan in Hong Kong. Thank you.
Yes, hi. Good evening. Thanks for taking my questions. My first question on Internet services. I think you mentioned about 30% or slightly higher than 30% of revenues came from non smartphone or non China, non smartphone related.
Could we get a little bit of granularity in terms of Yopen and Internet Finance, how they've been doing? I think you gave some granularity, I think, in the last couple of quarters. Second thing is also on Internet services revenues. Could you give us a little bit more color in terms of how you feel about this business going into the rest of the year, especially given some of the renewed trade tensions popping up and some of the Internet companies disappointing on advertising revenue outlook? My second question is on Smart IoT Products.
The gross margins have been consistently in the low teens in the last several quarters, substantially higher than the smartphone products. Could we talk a little bit about why that is so? And how should we think about this? Is it a structurally margin product given I think your peer your competitors are probably also earning much higher margins in this space? Thanks.
Thank you, Gokul. Okay. In terms of Internet services, as we mentioned just now, our Internet services as a whole grew by 31.8%. And our Chinese smartphone advertising and gaming revenue is now 32% of our entire Internet services revenue stream, and that grew by 167.3%. Now across the board, all international Internet services, Yopin, TV Internet Services and Fintech grew strongly in order to achieve 167 percent growth.
We will disclose them we will disclose the gurning directly periodically. So that's the first question. The second question in terms of Internet services for the rest of the year. I think, well, we wanted to display here the 2 layers of diversification that we talked about. 1, I've already talked about, which is the European and international Internet services and FinTech Internet services from other IoT products.
Manu was giving you the example that we are putting in a lot of investment and effort in building up Internet services in other key markets as well, including in India, where over the last 12 months, we have launched 3 new Internet services, Mi Music, Mi Video and Mi Pay. Over the sort of medium term, we think that the tool this kind of
diversification will allow us
to have healthier sort of challenging revenue itself, because we were growing so rapidly over the last few years, the initial sort of first stage of growth was based on servicing the Internet industry. Our advertisers are from the Internet industry. Now what we did over the period of the last 6 months was to expand into new verticals. So to us, these are new verticals where we are growing from pretty much a clean slate. And that's again, this layer of diversification is the reason why you see more resilience in our Internet services numbers.
Now in terms of the general outlook, the general outlook for 2019, I think for the industry is still relatively soft for advertising. But the series of fiscal stimulus put in the Chinese government could have an impact in lifting business confidence and in consumer spend. The second, in terms of gaming, we are optimistic as we sort of move into the new wave of approvals coming into the gaming sector. So that's the way we look at it.
IoT. IoT margins.
Okay. Your second question is on IoT margins. As you know, our IoT revenue stream consists of of every one of these industries. And I think the different margin profile really reflects
Next question, please.
Thank you. Our next
My first question is about the ARPU trend. Since Q4 last year, we see that ARPU has been stabilized at around RMB 17 per quarter. So just wonder whether that should be the number we are looking at in the second half or in 2020? This is the first question.
Thank you, Frank. Let me answer that quickly. Our ARPU trend should be on an upward trend as we particularly as we as our Internet international Internet services revenue ramps up. So it should be on an upward trend.
Okay. And then the second question is about the MAU in China. Since you mentioned the MAU in China in Q1 is still growing, but I guess the smartphone shipment in the first growth?
The life cycle of a lot of our users is extending, Frank. So not every one of this is a replacement phones. Some of it goes to new users as well.
Okay. Got it. My last question is about the smartphones margin trend. Since I understand that the margin in overseas market in the Q1 is lower and given that you have a low you are having an improving margin trend in April, just wonder, is there any guidance for the second half or second quarter overall margins for the smartphone segment?
Thank you, Frank. As you know, we don't give specific guidance on our margins. But I think what you see over the full year is going to be sort of a more normalized number. Q1 is the result of a switch in our portfolio mix.
Okay. That's helpful. Thank you.
Thank you. Our next question comes from Leipin Huang with CICC in Hong Kong. Please go ahead.
Thank you for taking my question again. So the first question, can you because we have the senior executive from India, can you share some color on what is the latest status on the Indian market, especially on how the market grow? Because we see in China, the market actually slowed down falling to negative growth these days. Now how what's your plan to maintain or even extend the Xiaomi's market share in this market? Thank you.
Okay. So the first question is regarding the overall Indian smartphone market. So last year, the Indian smartphone market was 150,000,000 units and still about another 150,000,000, 160,000,000 were feature phones in India. So there's one thing which is significantly different between China and India is that in China, almost everybody already has a smart thing. While in India, there's still about 400,000,000 feature phone users.
And now a lot of them feature phone users, about 25 percent of them, which is 100,000,000, have started using data. So we do expect that many of these feature phone users, especially the feature phone users using 4 gs data, will migrate to smartphones over the next 2 years. Our estimate shows and based on multiple third party reports that Indian smartphone market will continue to grow at least for next 5 to 8 years. In next 4 to 5 years, we can expect it to grow from anywhere between $150,000,000 current $150,000,000 to upwards of $200,000,000 over next 2 years. It may also be higher than that.
So from an overall market growth perspective, we do think the market is going to be very strong. The second question that you asked was around what do we plan to do to sustain this growth. So on the online segment, as I mentioned, we have had about 50% market share for last 10 quarters. And yes, we continue to that 50% market share in the online segment. While the twothree of the market is offline, where we were negligible, and we have grown rapidly to capture about 20% market share.
We're still building our offline channel because we're just present in about top 40, 50 cities. We're now going to few 100 and few 1000 cities in offline. And with that, we continue we expect that we will continue to grow our market share within off line. If we hold our market share in online and continue to grow our market share in off line, our overall market share should continue to grow within the Indian smartphone market.
Yes. A follow-up is the one thing Xiaomi is very interesting to us is the capability to monetize on the smartphone platform. So where we are now in the monetization of the smartphone in India market?
For India market, it's too early. We have started monetizing some of the services mainly in 3 areas. 1, if you look at our overall OS, we have integrated many services like there's a company called as Ola, which is used for booking caps, and their service is integrated into our OS. Similarly, we have integrated a lot of services within our OS. 2nd is we have a lot of platforms like our security platform, a browser that we have started monetizing.
3rd, we are launching specific services like Mi Music, Mi Video, what I mentioned, and which we haven't started monetizing yet to a large extent. But over a period of time, once we have significant number of users using them, we will start monetizing them. So overall, it is still at an early stage as compared to where we were in we are in China but growing very rapidly.
Okay. Now we'll take the last question.
Our last question comes from Gokul Hariharan with JPMorgan in Hong Kong. Please go ahead.
Yes, thanks for taking my question again. I had a follow-up question for Manu. Manu, could you talk a little bit about, I think on the monetization bit, just as a case study given this is the 1st market where Xiaomi is trying to monetize smartphone user base in the existence of larger Internet platforms like Google, Facebook, etcetera, how does that partnershipcompetition work? And how do you monetize the user base in the existence of, say, companies who already have an App Store like Google Play Store, etcetera? That's my first question.
And secondly, could you talk a little bit about what's happening from a competition perspective in India? I think it looks like the domestic players are already out. It's largely Chinese players plus Samsung. So what's happening from a competition perspective, especially with new brands like Realme basically getting created out of nowhere and almost like 7%, 8% share in the last few quarters?
Gokul, before I hand over to Manu, it's Shao here. Just to clarify, we are actually making Internet services in many countries, not just in India at this point in time. As you are aware, we are close partners with, for example, Facebook and Google, where they share some of their search revenue if we give them incremental traffic, where we are also connected to their ad networks, which help us sell some of our inventory, both Facebook and Google. So India is not the first one we're doing when monetizing from. So the time to Manu.
Sure. So from a monetization perspective, of course, companies like Google and Facebook have a significant base. But in the services that we are launching, as Shao mentioned, in many of the services, we are seeing collaboration like Google Pay share some of their search revenue from us on the mobile platform. And on many of the services, we're also seeing partnership with companies like Facebook and Inmovi, where we our inventory using their platforms, their ad using their ad networks. Overall, we see again, this is an early stage because we've just started integrating a lot of these services over the last 1 or 2 years in India, and we have started monetizing them even more recently.
So we are building a lot of unique services, which are specifically for India, which we believe many of the big companies might not be able to build. For example, our Mi Video platform comes with 700,000 hours of content, which has been accumulated across from multiple providers like Root, Hotstar and many more. It's one of the largest content platforms in the country. And more than percent or approximately 90% of this is free. But over a period of time, we do plan to monetize some of this content in India.
So again, the start is pretty encouraging, and we expect this to continue to grow over next few quarters or next few years. The second that you had was around competition. So on the question on Realme, Realme is actually an Oppo company or Oppo brand, which was specifically created to fight against the online segment. But even after Realme or the new competition branch came in, they are not just Realme, but there are many other competition competing brands like Honor, like ksus. But we have seen that we still have an extremely loyal user base.
So despite many of these competition brands coming in Q3, Q4 and Q1, if you look at our share within the online segment, which is where all these brands are very active, we still continue to have about 50% market share in the online segment. So while they have taken away share from many other brands, our share within the online segment is still 50%. And within the offline segment, we continue to eat away market share from many other more established brands, which have been there for last 15, 20 years. So yes, is the competition increasing? Definitely, yes.
But despite that increased competition, our share and our growth continues to
improve. Gokul, I'll add 2 more things here. 1, the fact that Oppo is learning from us, I think it's validation. Like I said, imitation is the most sincere form of flattery. And the second is, at the end of the day, we are a company that believes in operating on efficiency.
And we believe that as long as we continue to focus on our product design quality user experience and then unwavering attitude towards efficiency and returning the cost savings to our users, we will do it eventually.
We'll take one more question.
Sure. The question comes from Piyush Mubayi with Goldman Sachs in Hong
Thank you for taking my questions. First on here, Manu, can you talk about what percentage of Internet revenues you've started to earn? And in particular, I think I read somewhere you've got 2,000,000 smart TVs installed in the recent couple of quarters. Is there an ad model there that's started to work that's been effective? That's my first.
2nd, and moving on the Internet line as far as China is concerned, could you talk through the impact that we've been observing of the slowing down of the advertising spend showed on your business into the Q2 onwards. And we've seen this coming through in the lines of every other to also ask if to also ask if outside India and China, you've got exposure that's building up nicely through how your business has been built up in
Europe? Manu, I don't use it. Okay. Regarding the
service, the share of Internet service revenue coming from India, we're not sharing it at this point of time. All I can say is it's pretty fast but also from a small base because, as I mentioned earlier, we've just started monetizing it over the last few quarters. Your second question was on TV, where yes, we have sold we are probably the fastest growing TV brand in India, also the number one smart TV brand for last 3 consecutive quarters. So on TV, we haven't started monetizing any kind of ads, but we are monetizing content. So the same 700,000 hours of content, which is there on May video.
On TV, we have our own operating system called as Patch Wall, and we're the only TV to have a dual operating system. We have stock on Android, and we have Patch Wall. On Patch we provide the same 700,000 hours of content, which we have on Mi Video. So the way that we think about this is there are 2 different platforms to consume the same content, the bigger platform, a bigger screen, which is TV and the smaller screen, which is smartphones. And you can switch between the content across these two platforms or these two screens.
So about 90% of the 700,000 cards of content is free. Remaining 10% is paid. So when you voice the paid content, some part of the revenue goes to our service provider like Voot or Zee, and some part of that revenue comes to us at Xiaomi. So these are the two questions that you asked about India business and it was a question about For
advertising in China, Piyush, as you talked about a few points on this call. Yes, generally speaking, I think the outlook is soft. From a macro point of view, we think that the fiscal stimulus put in by the Chinese government of about RMB 2,000,000,000,000 in size should go some part in alleviating sort of at least business confidence and spur retail. But the tax cuts have just been affected. So we are also optimistically awaiting this.
But even with all these macro factors, I think the diversification that we have enjoyed and put in effort over the last few quarters, I think starting to bear fruit. And we believe that even in this kind of we can remain resilient.
Thank you. So thank you everyone for joining
the call tonight. We will now be closing the call. If you need further information, please take a look at our website for the results announcement.