Good evening, everyone. Welcome to Q1 results announcement for investors conference of Xiaomi for our conference call and audio webcast. Today's conference is being recorded. If you have any objections, you may disconnect at any time. If you have any questions you would like to raise during the Q&A session, please press star one on your telephone keypad to register your question. Should you wish to cancel your question, please press star followed by two. I'd now like to hand the conference over to your host today, Ms. Anita Chen, Head of Investor Relations and Corporate Finance. Please go ahead.
Good evening, ladies and gentlemen. Welcome to the investor conference call and audio webcast, hosted by Xiaomi Corporation regarding company's 2024 Q1 results.
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 the general market conditions are coming from a variety of sources outside of Xiaomi. This presentation also contains some audited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, and the company's financial prepared in accordance with the IFRS. Joining us on our phone call today, we have Mr. Lu Weibing , Partner and President of the Xiaomi Corporation, Mr. Alain Lam, Vice President and CFO. To start, Mr. Lei will share recent strategies and the business updates of the company, followed by Mr. Lam to review the financial performance of 2024 Q1.
Following that, we'll move on to the Q&A session. I turn the mic to Mr. Lei.
Good evening, everyone. This is Lei Jun, and welcome you all to the Q1 2024 of Xiaomi's result announcement. So in 2024 Q1, our business is quite stable and robust. This is thanks to us further consolidating on our technologies of our areas of business, we have done quite well. In the meantime, the Xiaomi EV business, after three years, has finally launched. And from 2023, our Q3 business has turned into positive and further growth of last Q4, and we can see that our revenue has grown by 27%. In addition, our profit has also continued the growth trajectory. Tonight, we have two parts. One is on our business and the highlights, and the second part is to talk to you about the Xiaomi EV business.
In 2024, there are still a lot of uncertainties in the external environment. So with this, we continue to see our business are running on a high efficiency. For 2024, Q1, we have a revenue of CNY 75.5 billion, year-on-year 27% growth. For adjusted net profit, CNY 6.5 billion, a 100.8% year-on-year growth. Gross profit margin, 20.3% growth. In terms of our cash resources, cash and cash equivalents of CNY 127.3 billion. And in addition, our core profit has realized new highs. To talk about our international business, and for the first quarter, thanks to our international business as well as the globalization for smartphones, for continued 15 consecutive quarters, we continue to maintain top 3.
We can see that, out of 63 countries and 56 markets, top three, and 67 markets, top five. For the global market, we have seen overall growth and especially in the emerging markets, and we have seen very good growth. For instance, in Middle East, up by 7.1% to 20.9%. For Africa, it has reached 10.6%, up by 4.5%. Southeast Asia, with a market share of 16.5%. For Latin America, with a market share of 15.3%, up by 2%. So for our mobile phone business, increase has also led to further increase of our existing business.
We can see that in the China business, and we have the monthly active users to continue to grow in both China and abroad. In the meantime, this has also brought a very strong momentum for our business. Going forward, we will continue to build a very safe and active platforms and to look at the closed-loop development, because we have different categories of product. For our core business development, in terms of the synergy of the business, has provided us with a very solid background. On the 28th of March, we have launched our Xiaomi SU7 product and through our various stringent testing, and it has become a very popular product among millions of consumers. For April, we have already delivered over 7,500, and on the 15th of April, 10,000 delivery.
In addition, we have also met the promise that we have made, and once it's launched to market, it will be delivered to the consumers. In addition, we continue to ramp up our business in June, and we are looking at a delivering of exceeding 10,000, and we are also will be looking at a 100,000 delivery in the whole of June. In terms of sales, we'll continue to further look at the selection of sites and further expand our business. Here we can see that we will be covering about over 80 cities, and set up about 50 different service centers covering all the provinces, the cities, autonomous regions, and direct autonomous cities.
In terms of ADAS, we continue to invest in this area for our ADAS team, and our total investment is a total of CNY 4.7 billion, and by end of 2024, we will expand the team from 1,000 to 1,500, and then to 2,000 next year. So for Xiaomi, in terms of ADAS, we have expected our expectation. In addition, in this market, I would believe that we are setting the bar for the market, and in August, so in mainland China, we will be expanding all these services. So we have also carried out our live streaming session and of autonomous driving from Shanghai and between Shanghai and Hangzhou. For Xiaomi, we also pay attention to our closed loop of business.
So apart from the EV business, it also has a very long impact business, and with Xiaomi's business, and we can see that this has led to major changes in the structure. For instance, from a narrow group of people and now to a wider coverage. By the end of April, we can see that female car owners will be 40%-50%. For BEV vehicle owners, they account for 29%, we believe that with our invaluable driving experience, we'll also be pulling in more BEV users. With Apple leaving the auto sector, we believe that and we hope that more and more Apple users will come to Xiaomi to purchase our vehicles. The second is on premiumization.
For the past few years in mainland China, we have already completed our premiumization strategy, and we are now cornering the market of CNY 4,000-CNY 5,000 market sector. And we believe that with the mobile phones as well as the vehicles, this will continue to drive our premiumization strategies. And going forward, for Xiaomi, we will be dedicated to the development of premiumization. So thirdly is about our vehicle as well as our new retail business. In the past 4-5 years, with our new strategies being launched, and we can also see that for new retail business and has gone up to 9%, and the new retail of Xiaomi, and this is also an improvement in our closed loop business.
So for this year, we will try our best to use 3 years of time by 2026 for Xiaomi Home, and we will have 20,000 stores. In addition, for Xiaomi vehicles joining the Xiaomi New Retail, we will be upgrading the Xiaomi Home stores, and we will be moving to the best locations to further expand the floor area and to ensure that we have a very good return. In addition, we will also be looking at changing the ecosystem and so that our users would be able to fully enjoy the ecosystem products that we have to provide to them. Finally, I'd like to summarize for Xiaomi's product, for our R&D delivery, as well as the execution and our capability and organization capability, we are outstanding.
Secondly, this also reflects that, for the company's great grasp of the demand of the consumers, and this has also reflected for the Xiaomi's models development. Even if in 2024, for the macro and the environment, we still face a lot of challenges. For instance, there is the trajectory of cost of core parts are going up, et cetera. And we are still confident that we are able to meet the challenges of the external environment. We also believe that, in 2024, with our capabilities improving, we would be able to deliver an excellent results to the investors. So we now pass the floor to Alain.
And great thank you, Mr. Lu, and dear investors, good evening. So as, Mr.
Lu has mentioned, and while enjoying our robust business, and for this quarter, and we can see that for our group, we have seen very good results for 2024 Q1, and we have CNY 75.5 billion for China. This accounts for about 49.8%, for overseas, 50.2%. For this quarter, we have realized quarter-on-quarter growth, and it's up by 27%. In terms of our overall gross profit, it's up by 2.8% year-on-year, 22.3%. Compared with the last quarter, it is up by 1.1%. And looking at the specific business, and for our smartphone business, it accounts for about 61% of our total business, and it enjoys a business growth.
According to the data, our smartphone business, we now currently rank top 3, and this is for consecutively 15 quarters, and we are ranking top 3. In addition, we can see that our business compared with 2023, it's up by 3.6% year on year. For the Q1 of 2024, our IoT business, we have enjoyed revenue and gross margin both improving. The revenue is CNY 20.4 billion, up by 21%. For this quarter, with the IoT various segments, we have seen very good results. For instance, our home appliance products for AC shipment has grown by 60.3%. For fridges, has grown by 52%.
For washing machines, has grown by 47%. In terms of pad product and tablets, we continue to see very fast growth. It is up by 93% year-on-year, and it ranks number five globally and number three in China and wearables. For this quarter, in China, our shipment has jumped to number one. Globally, we have been able to enter number two. And thanks to all these high growth, profit margin growth and IoT and lifestyle products, this quarter has reached 19.9%, creating a historical high for internet business, where user base continue to increase. In 2024 Q1, global business, we continue to see new highs. For the users, it's about 658 million. For the new, the increased total customers, about 17 million.
In mainland China, it's about 160 million, about 9% with the 5 new user for internet services. For this quarter, it's CNY 8 billion. Again, it has creating a new quarterly high. It's has gone up by 45%. For our overseas business has grown to CNY 2.5 billion business for internet services. This accounts for 31.2% of our total internet business, is up by 5%. For this quarter, in terms of the expenses, and the expenses, if we take away the CNY 2.5 billion of the new investment, our core expense is CNY 9.6 billion. For the expense ratio, 12.8%. It is down by 0.7%.
While controlling the expense, we continue to further expand our R&D, and we continue to invest in R&D. For our R&D expenses, it's CNY 520 million. It is up 24% for net profit. And, for the adjusted net profit is at CNY 6.5 billion, it is up by 100% year-on-year, creating a new high. And in terms of our core business, it's about CNY 8.8 billion. And, again, this is a new historical high. And in terms of cash position, by end of March, and our cash resources is CNY 127.3 billion. In the meantime, we have also been very active to repurchase the shares in the open market to give back to our shareholders.
So far, we have already purchased about CNY 2.25 billion, exceeding that of the whole year of 2023. Finally, I would like to talk to you about ESG. In April, we have gone to ESG report, and this is the sixth year that we continue to launch our ESG report, a few different targets. The first one is no later than 2030 for our main businesses. The commission will be about 30% of the benchmark year. By 2035, we will be realizing 100% usage of a renewable power in our own operations. By 2040, for our own operations, we will realize carbon neutrality as well as 100% adoption of a renewable resources. In addition, two weeks ago, we have two female corporate VPs, and we have Ms.
Zhang Jianhui as Ms. Xu. This is something that for Xiaomi's company, we continue to push forward for gender diversity and for better professional management of the company, and a very important step that we have moved forward. Thank you, everyone. This is what we have to share with you all. We can now go into the Q&A session.
Thank you, Alain. We now go into the Q&A session so that more investors have time to ask questions. Please limit your questions to two.
Thank you. If you would like to ask questions, please press star followed by one, star by two to cancel your questions. The first question comes from Andy Meng from Morgan Stanley. Please go ahead.
Thank you, management team. First of all, we would like to congratulate on the success of Xiaomi EV.
So going forward, for the synergy, between your, human plus, EV and plus your ecosystem, and what are the push for your other smartphone business, in the meantime, for your traditional IoT and internet business, and how are they going to empower your EV business? Thank you.
Thank you very much. Thank you, Andy. Well, in terms of the synergies, we can look at it like this, and one is from the product level or technology level, and, secondly, we will look at it from different dimensions. So for smart EV, cars, and, for this part, and, in terms of, the consumer sector, we have a lot of experience in terms of technology as well as, product, and we are already starting our work in this area.
For instance, you can see that, for consumer electronics product, we are simply just at the starting point. Later on, we still have a lot of room for further growth. So this is one area. Another area is looking at the user's perspective. I have already shared with you all, and you can see that whether it is, I myself, or, the various, lady or female consumers, you know, all of this is something that we were not able to achieve with simply smartphone in the past. So this is on the consumers. And the third part, which is, the stickiness of, customers. So if we look at the system today, and, is that, the stickiness of the customers or the cost that it would obtain, and, we can see that it's very low.
And in addition, in this closed loop for Xiaomi, in this Xiaomi's ecosystem, and we can see that the cost for the users leaving the ecosystem loop will be very high. So for people who purchase our cars, and you can see that they will have quite a lot of Xiaomi products already. So these are all synergies. And of course, this with time goes on, is only going to be further enhanced. And with respect to this, I think that we still have immense potential for us to reach there, and we will continue to make progress.
Thank you, Mr. Lu. My second question is with respect to smartphone's gross margin.
And, when we communicate with the investors, and we do talk about this, and in terms of some of the costs going up, and what are your measures to keep the cost down and efficiency up? And, compared with your peers, what are your advantages?
So this is an old topic, and people will ask me about this every quarter. And, for this, so with the components price going up, people will say whether our smartphone business will be affected. So for the core components, cost going up, it started from last year's Q3, and, for Q1's profit margin, you can see that our growth profit margin is quite good. And for Xiaomi, I think that a few things we have done. One is, for strategic reserves to get ready for our industry, especially for the...
For instance, the cost, and, you know, whether we will need to increase our inventory and whether we need to reduce our inventory and for the memory parts, and that's very important, and we know this all very well in the industry. And today, for Xiaomi's scale, everybody can see this. Before us, we have Samsung and Apple. The scale difference is being bridged. It's becoming smaller and smaller, and the difference between us and the people behind us is actually getting bigger and bigger. So Xiaomi's efficiency is now emerging, actually. So for Xiaomi, for our domestic peers, and they all have some advantages, but if we're talking about camera module and memories and all of these important components to all have some advantages, and this business will be quite big.
So I think this is an area that we will be able to conduct the business on. And thirdly, is that, for Xiaomi, for the past few years, and it's about the product structure. So we continue to optimize our product structure. And in terms of the product structure, once optimized, they will also help us to cover some of the impact from the cost going up. And number four is a smartphone plus AIoT plus EV cars at the moment. So you can see that AIoT, our gross margin has actually gone up quite well. And for non-mobile phone business, and we can see that we are trying to move towards this direction and to try and get everything to be along the same page.
And thank you, Mr. Lu, for your question. For your answer.
And, our next question is Timothy from Goldman Sachs.
Thank you, Mr. Lu, and, we would like to, first of all congratulate you on your excellent results and the questions. And, the first one, Mr. Lu, you talked about, new retail. This is a new year, and you will also be adding another store. So if we look at China, so can we please talk about the expansion as well as, the scale? You know, what are the ones that you are directly running, and what are the franchisee? And in terms of overseas expansion. So we, want to ask about, the expansion in which areas, from what SKUs? And secondly, from Q1, we can see that our overseas internet business has, grown quite a bit by 40%.
Can we please know more about the reason of this growth?
Well, let me have Alain to supplement, and I will take the retail business first. So what is the further expansion and which is that in 2021? We can see that in 2021, 2022 and 2023 for the retail business or the efficiency of single customers, it is not enough. So we have done some consolidation last year, and basically, we have been able to improve its efficiency. For this year, we're looking at further expansion in the next 2024, 2025 or 2026, and we will be adding another 10,000 stores. So our total store number will be 20,000. Second is upgrading. In 2021, we opened the stores very fast.
We have also noticed that some of the stores and the quality is not very high, it's not the best location, and the floor area is not really in line with the development of our business. So we need to upgrade these stores. And for upgrading these stores, we need to move them into the best locations. We need to further expand the area, et cetera. So this is something that we have done well this year. And thirdly, for the EV New Retail, and we need to build it up. And for this year, and we have 59 stores, so we can see that when we to go and obtain these cars, people need to wait for 1-2 hours. So shows that we don't have enough stores.
Therefore, for our EV stores, we need to be expanding it to over 50 cities at the moment. Some of the customers, for instance, people need to take a train and to get across town for 300-400 km to get to the store. We're looking at building more shops and more stores. This is something that we are talking about in China. In terms of progress, we have been making good progress, I would say. I would think about this as in terms of our shopping malls stores, and we'll expand them to 500 square meters right now. So for 500 square meters, we can fit possibly 3 cars in there. Right now, we also have a lot of different colors.
For instance, the light purple one is very popular, and in a lot of other peers, you can't find this color. So we think that we are going to further expand the floor area and to expand the construction. So for the overseas market, and we also have, for instance, over 2000 of these stores. And for these stores, in terms of its building of these stores, as well as its efficiencies and controls, et cetera, and it's different from China. It's still lagging behind. I have been around 25 countries, looked at a lot of markets and finally, so for Xiaomi's new retail, and we do think that this can be replicated in the overseas market. And regardless of their GDP size, there is the potential.
So we need to look at the next five years, whether we would be able to open up 10,000 Xiaomi Home stores. Apart from the support for our smartphone business, for our IoT business, overseas expansion will also be very convenient. In the China market, it's about 50% now, on mobile business, about another 50%. For overseas, AIoT business is less than 20%, and I think a very important part of that is for overseas, and we do not have these highly efficient channels. Therefore, for our IoT business, this is very important. If we then further look forward into the next few years, we also need to have a Xiaomi New Retail, and its initial infrastructure, buildings, et cetera. So those are some of my thinkings.
For internet business, we have Alain to answer. For overseas internet business, if you look at this, for this quarter compared with last year, we have basically grown by about 50 million from, you know, 450 million to now 500 million. This is quite a good growth. For ARPU this year, it is about CNY 5 per customer. We are able to improve our ability to turn this into cash.
The first one is that with our shipment and continuing to grow, and we are looking at the revenue growing, and in the meantime, we are also expanding some of the new customers, and we are now putting these new customers onto our plat- In addition, for our users, because they have a quite a big size, and so that's why it's helpful. And finally, so for these customers and, in terms of our share of the profit and will be increasing. And so this is also why that going forward for our business overseas will continue to grow.
Operator, please.
Thank you. Our next question and from Citi. Please go ahead.
Thank you. Thank you for giving me this opportunity. So first of all, congratulate you on your excellent results.
Second, for the IoT business, what's your gross margin? And we have heard that, Mr. Lu, you are using the internet business and to offset the pressure. And from the IoT's business and from 20%, and do you think that this is a gross margin that can be sustained? In addition, so for the company and you continue to optimize your business, for this area, what is your very ideal gross margin that you would like to achieve? And another point is that in terms of your overseas IoT business expansion, for instance, home appliance and other wearables, et cetera, and what is the deployment strategies that you have, and in terms of the product as well as in terms of your product launches and what's your plan? Thank you.
That's my first question.
Well, in terms of AIoT and this year, our strategy is that is with the human and the vehicle as well as the ecosystem. So one is that our industry leading strategy and why we say this, and it's because our AIoT industry in the past, it started from our ecosystem chain, and in the past, it's basically this ecosystem. And so for our team, we continue to build this with the eco chain. And so with this model, and it's very faster to deliver products. We have also been able to achieve very good results. With the development of our business, we do see that this system is encountering some difficulties and flaws. So this model, for instance, you know, if we simply go by light asset, it's not enough.
In the past few years, we have added some new examples, for instance, for laptop, and we now have given it to the smartphone and for AC business, it used to be in the ecosystem department, ODM, and now we are now doing it completely self-research. So you can see that, we use these capabilities, and we use our product running capabilities, et cetera. And only when we do this, only when we have them in our hand, that we are able to realize the growth in this sector. So in the past few years, we are gradually doing these things. And for this year, we are realizing all these products, and I can say that, that should cover most of the products.
And for this year, you can see that for our AC, it's been selling very well, and we are now able to grasp all these key components. And for tablets, you can also see that it's 100% wearables resources, and again, excellent performance. So these are some of the decisions that we have made three years ago. And going forward, and we will also be looking at our TV and for instance, Mini LED and our new TV, and these are all growing. And why is it so fast? It's because we are doing this one thing. And when I tell people about this, you know, I think I'm confident that this is sustainable. And in terms of the results that we have, if we look at this, this is just the beginning.
Whether specifically do we have a gross margin target? Because for different products have a different gross margin. For instance, laptop versus AC, it's a very different huge. So we do not have a very specific situation. However, what we can see is that we will be looking at, for instance, each of these other companies, we will benchmark them. For instance, AC will be looking at Gree, and for TVs, we'll be looking at Samsung and Hisense, et cetera, but we don't have a general standardized gross margin target. Talking about going global, there are two points, and one is that for one product, whether you can sell it to the global market, and I think that there are two points. One is the compliance of your product.
So we need to be able to have this compliant and to implement it in each of the market. And secondly, and how well is this matching with that market? And looking at, at now, it's still quite big. And for instance, in certain, you know, countries, we have quite a few different SKUs. And so we are looking at this to resolve the problem. And, secondly, I need to, say that for the product goes out, are you able to sell this product at a high efficiency? I think that's very important. And, for Xiaomi and for instance, Xiaomi Home, Xiaomi New Retail, and these are all very important and excellent platforms.
So this is what I have to say, and I think that from this perspective, for the overseas market, AIoT has a huge potential, and from the market size of the growth, a huge potential, and whether we are able to resolve Xiaomi's problems and to build up our capability, and that's what we need to focus our energy on.
O kay, thank you. So basically, we would be able to continue to see high gross margin. Okay. My second question, and for your EV business. So recently, with the, we can see that, some of the orders, have been given to some others, and, we have, seen that, you know, perhaps you are encountering some problems, receiving orders, and you also talked about, your service centers and, stores.
Do you have any other ways, for instance, in terms of your marketing, et cetera, and can continue, for the market party and, to receive more orders? Because, for this party, and, we want to see a continuous momentum of the orders. Thank you.
Well, let me say this. Today, for Xiaomi's business, the biggest problem that we encounter is delivery. If you turn on Xiaomi's app, it will actually remind you for the delivery time. Right now, it's still about 30 weeks plus, so that'll be after New Year of next year. So I think that the lock up of orders, that's the biggest challenge for us. And, what we can do now is to improve our output and shorten our delivery time.
So for instance, our Pro, you know, we were going to be delivered as in mid-May, and originally planned was April, but we can't over commit to the users. We hope that our actually delivery time is shorter than what we have presented in the PowerPoint. So there are a few solutions, and number one is that looking at our factories, and at the moment it's about three shifts, and we have spent some time and working on the transformation of this business and the factories. So in June, we will be able to double our product ability, and which will help us to deliver. And basically, for the customers, when they place their orders, they can see that the delivery time has shortened.
So this is the biggest problem today, and it is not about our service network, and it is really about the delivery network. And at the moment, what we can see is that our target is that we ensure 100,000 of delivery, and our challenge target is 120,000. So we would like to achieve 120,000 delivery by end of this year. It's very challenging. So if we were to resolve this issue, and I don't think that the order will be a major issue because we continue to enjoy very good word of mouth at the moment. Okay. Do you understand?
Yes, I understand that. Thank you.
So our next question comes from Zoe from UBS, please.
Thank you, management team for taking my call.
I have small questions, and the first one is, mobile, and, congratulate you on your premiumization business, and the core premiumization percentage has improved, and for 5,000-6,000, we can see your market share has increased in a short period of time. So starting from 18th of June, and we can see that including, iPhone and for this business, and there's a lot of competition. So for the, company and in the short period of time for June 18th, and in terms of the price as well as the volume and what are the impacts, in addition for the premiumization of the market, and what are the impacts? And I also have some small questions. In Q1, in terms of inventory levels, we can see that, compared with the last year, and we see a lot of growth.
So we want to ask that, is this because that you have done some strategic reserves of the inventory because of the components price going up? And in terms of these finished products, and what are the inventories or core components?
So I'll have Anita answer your inventory question. I'll take the first question. So for June 18th, and we started on the twentieth of May, and in the past, basically, it's about end of May, so it's ahead of time this year, and we can also see that e-commerce is very competitive. And for June the 18th, and if you look at all these ranking and Xiaomi, we are often top three. So for June the 18th, what we can see is that it's roughly on schedule within our expectation, I would say.
So this is number one, and second is that, on competition. So end of last year, we actually talked about this, and, we know that, last September for Xiaomi, and, we talked about, whether we would be able to have a good result for the premiumization, and we can see that Xiaomi has grown quite a lot. And for Xiaomi and, for the figure that we are looking at, and, from, MI's and from Q1, there are three brands that are on the decline and three companies are on the rise. So this is the situation, and in this competition, with all this pressure, and, for Xiaomi, we think that, for our market share continues to improve. So we still believe that for Xiaomi, we would be able to cope with the, the impacts from all these, external environment.
If we then go back to look at the budgets that we have done last year, it's actually faster than what we considered today. You can think of this simply, and so for Q2, and we believe that for our business, running would not be affected by the June the 18th. It's all within our expectation. This is my view on competition, and whether it's on Q2 or whether it is for the whole year, I would say that I am very confident and, as well as, what we have discussed in the past. Alain, please, further comment.
On this, you know, our inventory, and we can see that inventory, we have seen some growth and a few points, and one is that, as you have said, so that, the strategic inventory was stocking up.
And based on our estimate, if the raw material will continue to go up, as Mr. Lu has said, and we will have some strategic stocking up. So this is something that we are doing. The second point is that, you know, we started selling our cars in April. We also have some Founders Edition, so 5,000 of these. So these 5,000, we have already produced them, and they will appear on our inventory on the 31st of March, that they have already been produced, but they have not been sold. So that has also taken up some of the inventory. And thirdly, some of the categories, we are about to enter into the peak season.
For instance, the ACs, end of March in Q2, you know that, we started the peak season, and, we are now preparing the inventory for AC so that they can do well in Q2. And the last point is, June the 18th, and, we have, started, some of the stocking up and, to get ready, for the performance and shipment on the 18th of June. So these are the four points.
Thank you, Alain, and thank you, Mr. Lu. That's very clear.
Okay, great. We have our next question comes from, CICC, please. Thank you, Mr. Lu and, Mr. Alain. So two small questions.
The first one is still on smartphone, and we can see that, and we have some regional breakdowns, and, for the, Middle East, and, it's, 113.3% growth. Can you please talk to us more about, you know, Middle East and some of the overseas market? We haven't yet paid so much attention to in the past, and what's the, the successful experience telling you? And my second question is, on AI and, for Xiaomi on AI. Recently, we can see large model, a lot of improvement. So in this area, we want to understand about your views as well as, your long-term, vision on AI. Thank you.
So from what we can see is that, for overseas market, emerging market, we're growing very fast.
Starting from last year, a few things we have done, and one is that from 2020 to 2022, because of the pandemic, and for our face-to-face communication, basically, that had been interrupted, and therefore, our headquarters, we think that... I started telling the team, and we started going on trips. Every time, it's about three weeks per trip, and we've gone to over 20 countries. So with all these countries, and we believe that with the business, and we can see that. So first of all, we have made a lot of human resources adjustment. And for instance, in Western Europe and Latin America and Southeast Asia, and we have made a lot of adjustment.
In important countries, we are making adjustments. After the adjustments, for the team, in terms of the execution from the headquarters, and we can see that it has improved greatly. So that's action one we have taken. Second, strategy. In the past, 2018 to 2019 strategy, till today's point, and we are making a lot of adjustments. So in terms of human resources, as well as strategies adjustment, with these two, we believe that we'll be developing faster and faster. So this is behind the excellent results in Q1, what we have done. In addition, in terms of potential, we have a huge potential. I can give you an example. Saudi Arabia is only single digit at the moment. So for a market such as Saudi Arabia, based on our experience, we would be able to achieve 20%-30%.
So for this, with the Middle East, we still continue to see a lot of high potential market. In addition, we also have Central America market. In Mexico, it's about 34%. So any major market that we open up, for instance, South Africa, and in Africa, we have doubled our business. It's 10%, and I think that with Xiaomi's brand capability to go to 20% in Africa, it's something that we should be able to achieve. So in this regard, I do think that a lot of potential again, and I am looking at my next trip, and I had been overseas for three weeks already, and we are now looking at my next overseas trip, and we are making a lot of adjustments.
So, I think that from this perspective, we talked about AIoT, and AIoT is less than 20% for overseas and for AIoT, and it's actually very high efficiency. So for overseas market, I believe that we do have a lot of very strong market. And for Xiaomi, for a product that we sell for CNY 6,000 in China and in Japan, we sell for CNY 9,000, and a lot of people would buy it, and for large TV, you know? People used to say that in Japan, they have small homes, and you can't sell large TVs. But now, like, it's been taken up in one go.
Everybody has switched up our product that we have opened to Japan, right? And, we all know that, you know, in Japan, so for a product in Japan, and, the gross margin is about, basically, 100%. So, you know, the product, comes into the shop for JPY 1,000, and then it'll be sold at JPY 2,000. So we know that there's a lot of, future, possibilities. And, for AI, and, maybe I go first, then Alan can supplement. And for AI, for last year, and we continue to talk about this. So last year, we talked about this, a very simple, principles, and one is that Xiaomi does not go into, the common large models, and we have shown some of these, these areas, and we can see very good results.
And, secondly, we develop end-to-end areas, and for this part, we can see that it's developing very fast. And thirdly, together with these companies, we continue to work with them and continue to launch something that is very common, can be connected with the generative large models.
And, for today, for the AI model AI smartphones, and they are not really AI smartphones, and they are basically AI feature phones. So I don't really think that they would be able to push forward for some major progress in this area. And I think that for AI, a few points, and as Mr.
Lu has said that for cloud, and this is a process of getting used to each other, and one, to use AI, one, to use cloud. And on the cloud, we will also be utilizing, using our own investment to work with the different companies to utilize the best models here. And secondly, we will also be looking at AI and human plus car, and for instance, we will be looking at ADAS driving and for this area, and how do we use AI more and for instance in these areas, and we see some differences. So in addition, we can also see that for our product, how do we use the hybrid mode so that people be, will be to enjoy the beautiful life brought to you by technology.
Finally, one thing that we continue to launch, which is that using AI to improve company's efficiency. So how do we use AI into our smart manufacturing? For the factories and how to use these AI and use these materials. So this is just a simple supplement from my side.
Okay, great. Thank you, Mr. Lu and Alain. Thank you very much.
So we have one next question coming from Huatai.
Thank you. Mr. Lu, I want to ask about IoT channel strategies, and we can see that North America and Japan so the impact is very big. And you talked about something that's very interesting, and overseas is 20%. If we say that it's 50%, do you need to work with more platforms?
In addition, I can also see that for some of the Chinese brand and in terms of their growth, profit is very different from Xiaomi, and whether you guys are willing to go into the different markets and different channels?
Well, for AIoT, I think that for Xiaomi, we have our own set of ways. We work well on Xiaomi Home and Xiaomi channels. We also work with different distributors and looking at expanding our channels and markets. This is something that's very for certain. We will also have our principles that we go by. For instance, we would adhere to cost efficiency and value for money and for instance, in Japan, we did not go into offline, and we basically insisted on going into the Xiaomi network.
And this is something that sets us different from some of the companies that go global. And we can see that, for instance, they have a 50% of the margin, and they need to pay various fees, and for their product, competitiveness is actually very low. So this is not something that Xiaomi would want to do. So for this area, and what we are doing is that we run the Xiaomi network well in each countries, in the core countries, and in addition, in the core countries for the Xiaomi Home to do well. Apart from Amazon, these e-commerce giants that cover all of the global countries. So we can also see that in certain countries, they have their local platforms, so we will also be working with them.
In addition, we also see that, for instance, in Europe, you know, we work with a lot of people, and, they are also very well recognizing our brand. So this is for AIoT. This is what makes us very different from others. Thank you.
Operator?
In the interest of time, we welcome the last question. The last question comes from J.P. Morgan, Robert, please.
Thank you. Very quickly, one question from me. For our EV business, we also see that a lot of orders. Can you please tell us about your gross margin for EV business? Do you have a gross margin target for this year or next year, as well as your production ramping up, please? Margin?
For gross margin for smart EV, I think that, Mr. Lei has also announced this, about 5%-10%.
What I want to say is that, for gross margin, we will need some time, because, for this, industry, and, we would really need time to be able to have some results. So let's just say, give us 3 months to June, and, we will have a better and more accurate, profit margin. And for gross margin, there are a few factors involved. One is that, scale. Mr. Lei, I believe he has, disclosed to the market that, for, recently we talked about delivery of 100,000, and then we can calculate that into our revenue. So today, we are looking at whether we can increase that to 120,000. So from 70,000 to 120,000, you know, you can see the scale has changed.
So 30, which is about, your, component parts and for your core components parts from this year, next year, et cetera, and, this would also decide, your procurement cost. This is very important. So I think that, we need some time and to really have our profit out, and then we can look at the profit margin and to set a reasonable target. And I think that up till today, you can think of it as we do not have a specific target that we have to reach. So I'm, talking about, you know, this product and going forward in terms of the product portfolio, you know, the possible impact, et cetera. So Robert, in our Q2, for our EV business, we will have some single segments, taking out.
So Robert, let me also update you, and in Q2, in our August result announcement, and you can see that, for this new business and in terms of the revenue and profit, and they will be split. So people can see that, for our EV business, its gross margin versus other categories and sectors of our products. So in Q2, we will be more detailed and more accurate about the disclosure.
Okay, great. Thank you.
Thank you, everyone.
Thank you everyone for attending.
This is the end of today's call. Thank you for your time. We thank for your continued support for Xiaomi, and we look forward to seeing you next time. Thank you, everyone. Goodbye.