Xiaomi-W (1810:HKEX) Q2 2026 earnings call transcript

Good evening, ladies and gentlemen. Welcome to the Investor Conference Call and audio webcast hosted by Xiaomi Corporation regarding the company's 2026 interim results. Before we start the call, we'd like to remind you that this call may include forward-looking statements, which are underlined by a number of risk and uncertainties and may not be realized in the future for various reasons information about general market conditions comes from a variety of sources outside of Xiaomi this presentation also contains some unaudited non IFRS financial measures that should be considered in addition to but not as a substitute for the company's financials prepared in accordance with IFRS Joining us on the conference today are Mr. William Liu, partner and president of Xiaomi Corporation, and Mr. Alan Lam, vice president and CFO of Xiaomi Corporation.

To start, Mr. Liu will share recent strategic and business updates of the company. Thereafter, Mr. Lam will review the company's financial performance in the first half of 2026. Following that, we'll move on to the Q&A session. I will now turn the call over to Mr. Lu.

Good evening, everyone. Thank you for joining our Q2 2026 results announcement call. In Q2 of 2026, external environments remain challenging, with the cost of core components such as memory remaining high, consumer market demand still recovering slowly, and industry competition becoming more intense. Tonight, I will take this opportunity to share with you about three aspects.

First, a review of our key performance results for Q2 2026. Second, we'll share our latest advancements in the fields of AI and embodied robots. Third, we will look at our strategic development direction and business focus for the next few quarters.

First, in Q2 2026, the group's total revenue was 108.9 billion RMB. adjusted net profit was 6.2 billion. Looking at different business segments, first, smartphone. In Q2, we proactively optimized our product structure and increased selling prices, resulting in a record high ASP for smartphones. Although smartphone shipment declined, according to OMDIR data, we maintained our position among the top three globally in Q2 of 2026, marking the 24th consecutive quarter that we have ranked among the top three globally in market share. In Q2 2026, we ranked among top three in smartphone shipments in 53 countries and regions worldwide, and among top five in smartphone shipment in 67 countries and regions worldwide. Our smartphone shipment ranked second in Southeast Asia, Latin America, and Middle East, with market share of 19.3%, 16.2%, and 13.5% respectively.

We ranked third in Europe and Africa with market share of 16.5% and 10.9% respectively. For gross profit margin, memory costs remained at historically high levels in Q2. We have consistently achieved a good balance between scale and profit through product mix upgrades, software optimization and improved operational capabilities. In Q2 26, our smartphone gross margin was 8.5%. Gross margin for the first half was 9.3%.

Second, IOT business. In Q2, 2026, IOT business achieved revenue of 31.3 billion RMB. Due to the high base effect of national subsidy in Chinese market last year, revenue declined year-on-year. However, thanks to the expansion of overseas channels and the increase in overseas product categories, overseas revenue increased significantly year-on-year this quarter. As of June 30th, we have opened more than 640 new retail stores overseas.

In second quarter 2026, Xiaomi tablets rose to the fourth place globally. TWS earbuds ranked second globally. Wearable products ranked second globally. This September, we'll also attend the IFA exhibition in Berlin, Germany, to showcase our comprehensive ecosystem of products for human car homes to the world. Our large home appliances will begin to fully enter the European market.

Third, Xiaomi EVs. Xiaomi delivered 104,199 vehicles in Q2 2026, marking the sixth consecutive quarter of year-on-year growth in deliveries. In the first half this year, Xiaomi Su 7 Series ranked first in sales among pure electric sedans priced above 200,000 RMB in mainland China. As of 17 August 2026, cumulative delivery volume of Xiaomi Su 7 Series exceeded 500,000 units. In July 2026, we held the Xiaomi Automotive Technology Launch Conference, officially releasing our first extended-range vehicle architecture, the Xiaomi Kunlun Technical Architecture. Based on this, we launched Xiaomi Sky Nomad series of extended-range SUVs positioned as intelligent variable-space SUVs, including the Xiaomi Sky Nomad N19 Max and N70 Max, with pre-sale prices of RMB 299,900 and 259,900 respectively.

Pre-orders have been enthusiastic. Xiaomi Sky Nomad will be officially launched in September and we hope to receive everyone's continued support. We continuously refine Xiaomi EV technology using the Norberg Ring North Sleave track. In June 2026, Xiaomi U7 GT with track package set a new Norberg Ring LED record with autonomous driving with a time of 10 minutes and 29.483 seconds. This achievement is the result of the joint effort of Xiaomi EV European R&D Center and our mainland assisted driving team. We hung our smart driving technology on the track to improve driving safety in extreme scenarios for mass-produced vehicles.

Second, the issues of AI and embodied intelligence that everyone is concerned about. Latest progress on Xiaomi's foundational large model. In April 2026, we released Xiaomi Mimo V2.5 series. On 2nd August 2026, CCTV reported on the latest weekly global larger-scale model core volume ranking of Open Router, with Xiaomi Mimo V2.5 topping the list. Its core volume increased more than six-fold from $1.5 trillion to $10.5 trillion in two months. Developers choose Mimo primarily because of its outstanding full model perception, intelligent agent, and code capabilities, highly competitive pricing, and the fact that the entire series is open source. Ultimately, the value of technology lies in the breadth of its use. We continue to explore how to extend MIMO from model capabilities to the Asian ecosystem.

In June this year, we officially released an open source MIMO code, an exploratory AI programming assistant. It's not just a useful AI coding tool, but also an AI teammate who lives in your computer and gets better at understanding you the more you use it. In the same month, we released the official version of Xiaomi MIMO Claw. and partnered with Kingsoft's office ecosystem to launch a full-chain document office efficiency improvement solution. At the same time, we officially released Miloco 2.0, an open-source whole-house smart AI solution centered on the MIMO big data model. This represents a further step in exploring the next generation of smart homes, enabling home devices to go beyond simply following commands and begin to think, thus exploring a new form of smart home in greater depth.

Benefiting from the continued growth in call volume, our API calls and token plan began contributing revenue this quarter. We'll continue to iterate on our foundational model, striving to place it among the top tier of models with the same parameter levels. It is gratifying to see that Chinese models have entered the forefront of the world.

Next, AI mobile phones. We have always emphasized that AI phones must integrate AI capabilities into OS. The Xiaomi HyperOS 4 that we just released is an important start. We've upgraded AI from simple question and answer function in individual software to a user-friendly assistant that can remember user habits, understand user thoughts, and truly help users get things done. Based on Xiaomi's self-developed MIMO model and the AI-driven transformation of the OS HyperXiaoi has been fully upgraded to HyperXiaoi 2.0, bringing a brand new interactive experience with the island and inspiration board features, while also offering two modes, quick and expert. The powerful expert mode with its comprehensive integration with operating system applications can seamlessly complete complex tasks across applications and devices.

For expert mode, we have launched a HyperXiao I2.0 expert mode point-based membership subscription plan. Each user will receive 1,000 points per month for free. Heavy AI users can flexibly choose their subscription plan with monthly special offers starting at just 19 RMB. Latest advance in embodied robots. In June 2026, our robotics team won two championships at CVPR 2026 and ICRA 2026 WBC. In July this year, we released several more important updates. At Xiaomi's EV factory, after a quarter of effort, Xiaomi's embodied robots have improved the success rate of dual-side tasks at the self-tapping threaded insert loading station to 98%. At the same time, our embodied robots have begun to explore new workstations in the logistics area of the final assembly workshop, sorting the center console side cover returnable box folding with success rate of 90%.

We have also officially released Xiaomi Robotics U0 and Xiaomi Robotics-1. Robotics-U0 is the first unified generative model in embodied intelligence field that can handle all four types of tasks, driving solutions to data challenges faced by the embodied intelligence industry. Robotics 1 was pre-trained on 100,000 hours of real-world data and then trained using cross-ontology data, ranking first in multiple simulation evaluations.

On August 5th, we officially open-sourced this model. Finally, I would like to say that in July this year, we were included in the Fortune Global 500 list for the eighth consecutive year, ranking 232nd, an improvement of 65 places from last year, marking a new high since we first appeared on the list in 2019 in 2026 can't our brands top 50 global brands in China list Xiaomi ranked second our expanding global brand influence will help us balance our regional impact and help Xiaomi navigate psycho economic cycles looking ahead to Q3 several factors that will put pressure on short-term operations remain storage costs will remain high consumer demand recovery will take time and competition will remain fierce however as we have mentioned many times before Xiaomi has always ushered in a new growth cycle after facing each difficulty by improving its capabilities after proactive adjustments over the past two decades past two quarters we have a clearer understanding of the external environment and our capabilities are steadily improving short-term pressure will not change our long-term strategy will remain committed to our goal of becoming a global leader in next generation hardcore technologies and continue to increase our investment in hardcore technology such as AI chips operating system and embodied intelligence to build strength for the next stage of growth that concludes my part now over to our CFO Alan thank you mr. Lu in Q2 2026 our total revenue was 108.9 billion RMB our gross margin was 19.8 percent our mobile times AIOT segment revenue was 84 billion RMB smartphone times AIOT segment gross margin reached 20 percent in the smartphone sector the continued significant increase in memory cost has had an overall impact on the smartphone industry we proactively optimized our product mix and increased pricing resulting in a record high ASP for our smartphones revenue for this quarter was 42.1 billion RMB accounting for 38.7 percent of total revenue our global smartphone shipments reached 31.2 million units according to third-party data in q2 2026 our high-end or premium smartphone sales in mainland China accounted for 32.1 percent of total smartphone sales in China a record high despite the significant increase in memory cost thanks to our continued product mix upgrades and strategies to balance the scale and profit through our operational capabilities our smartphone growth margin for this quarter was 8.5 percent in the IOT area our revenue reached RMB 31.3 billion in Q2 2026 overseas revenue saw a significant year-on-year increase driven by expansion into overseas channels and the wider product range gross margin for IOT segments was 20.1% this quarter although some product categories were affected by memory cost and the reduction in national subsidies from product category perspective we ranked a second globally in wearable wristband device shipments and second globally in TWS earbud shipments our tablet business rose to fourth place globally this quarter For Internet services, we have accumulated a large user base globally.

In June 2026, our global MAUs reached 770 million, up 4.8% year-on-year. Among them, MAUs in mainland China reached a record high of 198 million, up 7% year-on-year. In Q2 this year, our internet services revenue was RMB 9 billion. Growth margin for internet services this quarter was 76 up 1 percentage point year on year Now let me turn to Smart EV AI and other new initiatives For this segment revenue was 24 billion RMB this quarter up 17 year accounting for 23% of the group's total revenue. In this quarter, we delivered a total of 104,199 new vehicles, with Smart EV sales revenue reaching 23.9 billion RMB. Other related business revenue was 1 billion RMB, including revenue from AI big models or large models.

Gross margin of smart EVs, AI, and other new initiative segments was 19.2% this quarter. In Q2, 2026, we continued to increase investment in AI and other new initiatives. resulting in an operating loss of 2.6 billion RMB for this segment.

In this quarter, our R&D expenses was 9.2 billion RMB, up 18.9% year-on-year. In first half 2026, our R&D expenses was 18.2 billion RMB, up 25.6% year-on-year. with AI-related investments accounting for nearly 30%. In terms of net profit, the group's adjusted net profit for Q2 2026 was 6.2 billion RMB.

In Q2 2026, our capex reached 3.6 billion RMB, of which innovative businesses such as smart EVs and AI accounted for 65.8%. We remain committed to enhancing shareholder value and actively buy back shares in the open market. Since 2026, our share buyback amount has reached about HK$11.7 billion, exceeding the total amount bought back for the entire past year or previous year. regarding ESG in the research and development of low carbon materials we continue to increase our independent R&D investment in core materials Xiaomi's self-developed Xiaomi Titan alloy 2.0 released in July reduces carbon emissions by approximately 93 percent compared to traditional primary aluminum it has passed international environmental production international environmental product declaration certification and completed registration and public announcement while maintaining strength is toughness is further improved and all indicators meet the stringent standards for automotive structural components it has already been mass-produced and applied to the new generation su7 series and xiaomi u7 series this breakthrough in material technology further strengthens our independent technological capabilities and high-end product competitiveness in the smart ev business and helps enhance the low carbon competitiveness of xiaomi products in the international market in terms of disaster relief in july 2026 wangxi hubei gansu lianing jilin hebei and other places suffered from floods hail storm and other disasters the xiaomi foundation donated 10 million rmb in cash to support emergency relief transitional resettlement and post-disaster reconstruction in the affected areas in terms of technological innovation as of 30th june 2026 Xiaomi Innovation Joint Fund had funded a total of 274 million RMB in research grants, supporting 182 teams in mainland China.

Thank you, everyone. That concludes what we wanted to share with you today. Now we can begin the Q&A session.

there are a few points that will affect our smartphone results and performance at the same time first as you said memory costs increase and the extent of increase and the rhythm of increase last year we already predicted that memory costs would increase over a long cycle and to be honest regarding last year and Q4 and also Q1, Q2 this year, we believe that the increase exceeded our expectation.

The cost increase was indeed alarming. And memory costs increased. There's no way for us to just pass on the whole cost increase to our consumers. We have to rationalize our product lines and adjust our product mix so from product launch planning there's the need for a long a bigger cycle a cycle so we have to work on that secondly we have to adjust our sell strategies for low-end phones the entry-levels for the phones they are subject to the biggest blow or threat.

So for the memory version, looking at Q2 cost, well, smartphone retail price of over 1,500 yuan is being subject to the impact of memory cost, not to mention other costs. So that means that for entry-level products, it has to be sold at 2,000 yuan.

If we talk about normal memory capacity, not super memory capacity. So these factors added together mean that we need consensus on different fronts, not only unilateral consensus. After this round of adjustments for Q2, we achieved this report card. Our shipment declined on a year-on-year basis. However, we're still number three globally. Our ASP was at record high.

It rose by almost 300 yuan. And then our gross margin was at 8.5%. So I think last time you were all worried about our gross margin. However, we still kept it at 8.5%. I think this exceeded your expectation. so overall speaking I would like to say that when we move into Q3 memory cost increase we're still there in Q4 well I think it would be a slowing process of cost increase for smartphone business I think we are now in an appropriate and controllable situation in the past when the increase was of big extent well of course that was a big blow to us now I think we are in a controllable situation in Q3 I think you saw already so in the redmi flagship products well in the past we launched in October now we advanced it to August so Pro max and camera pro are launched together so I think they are doing well for K-Mac pro so I think more than 62% was 16 plus and then the ASP is 5,000 odd and today ourselves have not been completed yet but then comparing with the last generation I think the growth is 60% so I think you can see that given this product well first of all it sells well because of its product capability and then for future trend memory cost increase trend and price trend i think we have formed an expectation final conclusion is that now we are in a controllable condition for this business okay thank you mr lu my next question is about Evie in July you introduced the Sky Nomad series which had aroused market attention and there are many very unique innovations for this model in July you announced the price of the two models and you started to accept orders so mr. Lu based on the current order situation for Sky Nomad what are some unique characteristic and changes comparing with other competitors SUV what are some points that will attract car owners favor right for Sky Nomads I think we said clearly that they must be different in terms of user targets for Su7 and U7 so right now I think we have very well achieved this target for user base the duplication with two seven is very small so looking at the the duplication situation I think we are talking about the drivers we attach importance to drivers experience for Su7 U7 but then for Sky Nomad we are focusing on the spatial experience for the space so it is very different is we want to create a very good space and there are a lot of breakthroughs in terms of user scenario so after launch we have received many small orders and we have done some analysis first I think family how a family buyers or household buyers and also bigger number of passengers they will be the main buyers for Sky Nomad and age is their age is a few years older than the Suzevan buyers this is a clear unique points besides for our very flexible space I think there has been a lot of attention paid to it users have not really experienced that yet but then they have got already a lot of imaginations when we designed this car we had not thought of so many special features but now I think it can already satisfied many scenarios and so I think in terms of order expectation we are optimistic thank you mr. Lu very clear answer thank you Timothy Zhao from Goldman Sachs thank you mr. Lu and Ellen for taking my questions my first question is about AI progress we can see that in the China AI industry in the past few years innovations came fast and there were many good progress so can you systematically share with us the pathway of AI monetization what is your consideration in the short term medium term and long term what are your directions and what is the progress so far at the beginning of the year for the full year you mentioned 16 billion of AI investment budget so this year in the first half and also in Q2 how much is the overall AI investment what do you think of the whole year AI investment plan that's my first question thank you let me take this question as you can see and I think you pay close attention to our MIMO development in the first half we introduced MIMO v2 after that well it is well received by global users in terms of token call volume at the end of July in one week we came first globally, and monthly call volume also reached number one globally.

We think that this means that global developers had really voted for our model. And then when it comes to model capability and efficiency, and also cost control capabilities, there is a systematic advantage.

Now, let me give you a preview. In the future, well, recently, we will introduce some new applications so that people can use our memo.

We'll launch the first desktop application so that on your PC you can use our Memo. Secondly, I think you will pay close attention to our new model launch. It is being trained now. Very soon it will face the world. So there are many Memo developments. Now, just now you asked a question about progress of our commercialization. for AI we are now in a large scale investment phase so we are not too anxious to pursue monetization will continue to promote AI development in a steady and practical way so we will put our focus on human car home ecosystem when we launch our OS 4.0 memo large model and the hyper OS are already integrated hyper xia i 2.0 is also a very critical step in the future there will be more progress so we are making use of our me below memo large model and our smartphone our OS so that they are deeply integrated and then in terms of foundational models we have opened up some API and token plan earlier I mentioned our token plan and API which have already contributed some revenue however this business is just at a start we do not treat monetization as our prior as our primary goal so we are now iterating on our model capabilities we will launch some new models at the same time the models will be used in our OS scenarios there is some API revenue however we will not treat revenue as our main monetization goal at this stage so I hope I have answered your questions okay Thank you, Alan.

Regarding gross margin, well, you can see that our gross margin had fluctuated on a year-on-year and quarter-on-quarter basis. On a year-on-year basis, last year in Q2, that was the delivery stage of Su7 Ultra. Ultra gross margin is better, relatively speaking. So gross margin in Q2 last year was relatively higher because of ultra contribution. In this quarter for ultra, it was worsened a bit. and then if you compare Q2 and Q1 we delivered more new generation sue 7 it was launched in March and you can see sue 7 and you 7 share or breakdown are different from Q1 and in the launch we said that sue 7 cost increased quite a a lot besides well that's why for two seven delivery when its share is bigger in our deliveries rose margin came down on a quarter and quarter basis the third reason was already explained when our large model revenue started there is negative impact to gross margin of the whole segment so these are the three main factors okay thank you Ellen now regarding your second question just now we said that for Sky Nomad n70 and n90 in September they will be launched to the market well looking initially response has been quite good but we have not set the final price yet so GP margin will rely on final price so that would affect Q3 and Q4 gross margin of Sky Nomad okay very clear answer thank you Ellen next question is from kina wong of city can you hear me yes please go ahead okay thank you mr. lu and Ellen my first question is about smartphone so regarding inventory and raw materials in the first half there was a big increase some is related to backup or inventory for future use and then for your strategic plan especially for memory and also your reserve the margin or within controllable range how much is from the inventory to support your profit and gross margin for finished goods it also came down fast originally from finished goods inventory to support and now we can anticipate big gross margin pressure so in the coming quarter will this happen what is your strategic plan or preparation so should I ask my second question or leave it later okay regarding our inventory there are two reasons first raw materials inventory rose on the quarter-on-quarter basis last year or last quarter it's almost 30 billion in raw material inventory now in Q2 it is about 40 odd billion of inventory there are two reasons here the first point is we need to prepare some inventory for the future especially about memory mr. Lu had shared with you his evaluation so that's one point at the same time for memory unit price it is rising so it's not only about volume also about selling price it is rising so the value will increase that is about strategic inventory preparation and also selling price impact second finished goods inventory came down this is normal because at 618 we prepared some inventory and we actually released some inventory for sale and so I think the it is easy to explain the reasons behind the decline okay so looking at inventory reserve Q3 pressure oh sorry sorry another factor I just forgot as you know for new generation sue 7 it delivery started in early February.

So at the end of Q1, we also advanced some production of new generation Su7. And in Q2, overall inventory will come down. So there is also some impact from EVs.

for 2027 there'll be even more products and also Evie and you are going to have an overseas plan so are you going to do some preparation for example are you going to find land in overseas and also are you going to set up plans and then for large area stores do you have a plan about expansion so for IOT and EV overseas business how is your preparation and what would be your future outlook regarding IOT and also room for development overseas I think that there will be big room for growth now we are on track in implementation so we have 630 odd Xiaomi home stores in overseas and next year I will continue our store expansion for Xiaomi homes I think it is going to be I for IOT and high-end or premium phones that would account for 30% of our overseas premium phones this is going to lay a very big foundation for overseas business and secondly IOT especially for large appliances we have been blank overseas in the past but I think in the second half of the year we would accelerate our development next year we will see a very big growth in this area and then in different countries I think there are a lot of barriers and thresholds in market access or entry so there are a lot of compliance related work to do and that takes time so we will accelerate our work and then we will go into more and more countries that's about IOT and then for Evie going global it is on track in the second half of 2027 will go overseas and this year we have been to many countries and and for overseas EV working partners and dealers well they pay close attention to us they want to carry our products they want to be our dealers I think they are very passionate and behind that there are several judgments the first China EV is going global is going to be a mainstream in the future this won't change secondly when there are so many Chinese brands going global which will they choose to work with so this is a very important standard I think the fine Xiaomi very different and outstanding we can be regarded as unique and we are very few in China who can work on premium products or premium brands so we are very rare and third they see Xiaomi as a tech company producing EVs not traditional vehicles so in our experience communicating with dealers in different countries they are mostly top dealers top 10 dealers and there are at least seven to eight who approached us on their own initiative and then we also also visit many countries and many customers.

Thank you. For Internet service business, as you know, there are two parts. First, it's related with shipment. Second, it's related to our existing users. On these two fronts, for our existing users, MAUs reached a historical high already, 770 million globally. In mainland China, almost 200 million users. So for the existing users, they bring stability to our Internet business revenue. in the past few years we expand the premium phones and we achieved some progress so regarding MAUs premium users account for a bigger share premium users made bigger contribution to our internet app or more than low end users so when our existing users increase and also with more premium users in share then And this is very important to our internet business revenue stability.

In the past few quarters, advertising revenue saw healthy development. In the past one or two quarters, I think you saw a so-called war in terms of food delivery, and there was a lot of advertising, and this helped our smartphone advertising business. So I think these two factors have brought stability to our Internet business and also some strengthening.

Well, for AI plan, first of all, foundational large models. so our investment is the heaviest in this area in the future they will service our human car home full ecosystem that's the first line so it is at the foundation level and then on top of fit there are a few lines the first one is smartphone for smartphone we have to complete the traditional and Android OS so we will use AI to reconfigure it and then for this process it will take some time but now with OS 4 I think we have made a big step forward on the smartphone we can make use of the agents to do a lot of execution I think you can see it for home I think one important factor is me local recently there are many scenarios in which Miloko is being realized and there is cloud as well time precision is very good but cost is still quite high but when we optimize it and in the future when cost starts to come down I think we can see better results the third line is related with EV business so smart driving I think you are also interested in smart driving and then the fourth line is robots for our robotics business we have introduced a number of versions so these are the few lines I think all these lines deeply integrated with MIMO and then they would develop independently and they will also be integrated and for our full ecosystem support it will be stronger and at the end of the day we will see we will form a moat in relation to the human car home ecosystem very clear Thank You mr. Lu I have no further questions thank you for your questions let's wait for the next question next question UBS Jimmy you please go ahead thank you mr. Lu and Ellen my first question is related to AI looking at revenue we can see some growth related to AI so can you give more details so what would be future trend in relation to AI that's my first question Jimmy regarding AI revenue we put it under smart EV AI and other new initiative segments well now MIMO just started to be monetized and the revenue is not big in the future at appropriate times we may disclose it separately but at this stage we will still put it within this 1 billion okay well looking at the overall operating environment well there is still big pressure from memory costs so this year and next year when it comes to R&D expenses is the trend based on what you shared in the past for R&D expenses we have not made adjustment overall speaking I think we are quite firm on that okay thank you mr. Lu next question JP Morgan David Cho please Mr. Lu, Alan, thank you for the opportunity.

So what's the question? You mean the share for the whole year? so what is the estimate of the second half of the year or this year well it's difficult for us to disclose a specific percentage or share but our future goal is about these two series so i think the sky nomad is based on the quenlun architecture and our goals are in relation to the smart EV technology or driving.

for ASP volatility it is based on our product mix for Q1 there are more deliveries of u7 and then in Q2 more deliveries are about two seven two seven prices lower than u7 as a result ASP fluctuated last year in Q2 as I said earlier our ultra accounted for a bigger share than this year an ultra ASP is a lot higher than the average so that's why I think ASP is a result to us it's not a goal ASP relatively speaking is not related to GP margin it doesn't mean that when ASP is low gross margin will also be low I think you need to understand this relationship.

I think that would be an equilibrium reached after dynamic adjustment. For the smartphone category, I think it is almost a necessity. So I believe that I tend to be more optimistic.