Xiaomi, the world’s No. 3 smartphone brand after Samsung and Apple, reported a loss of 587 million yuan, or about $88 million, in the first three months of 2022 as the fallout from the Covid pandemic and parts shortages hit the business impaired.

The Beijing-headquartered company posted a year-on-year profit of 7.79 billion yuan, Xiaomi said in a statement on Thursday. Revenue fell 4.6% to 73.3 billion yuan during the period.

“The ongoing supply shortages of key components, the resurgence of COVID-19 and global macroeconomic headwinds impacted the demand and supply of the entire smartphone market,” noted Xiaomi.

Lockdowns in major Chinese cities, including Shanghai and Beijing, have wreaked havoc on global supply chains and the country’s economic growth. China is home to the world’s largest car market and the impact of the lockdown on that industry has been “gigantic” according to Bill Russo, CEO of Automobility (see interview here).

Earnings woes have contributed to a 59.4% drop in Xiaomi shares on the Hong Kong Stock Exchange over the past year; they have lost about two-thirds of their value since the end of 2020. Xiaomi closed at HK$11.08 on Thursday, above a two-year low of HK$10.36 on May 12. CEO Lei Jun is still worth $9.4 billion on Forbes real-time billionaires index.

Xiaomi, which has more than 10,000 retail locations in China in addition to its online sales, noted the impact of Covid on its offline business in the country. “Recently, the resurgence of Covid-19 in mainland China has weakened overall consumer demand, affecting the operational schedules and visitor traffic of many of our offline retail stores,” it said. “We are actively responding to these challenges and prudently managing our operations to minimize the impact.”

On the bright side, the company sold 19.5 billion yuan of non-phone Internet of Things and lifestyle products, including TVs, in the first quarter. Internet services revenue — which includes advertising and games — rose 8.2% to 7.1 billion yuan in the first quarter, “despite challenges posed by the volatility of our smartphone shipments and changes in the regulatory environment in the advertising and game industry in mainland China. International sales accounted for 51.1% of revenue, up from 48.7% in the fourth quarter.

Xiaomi also said that it continues to work towards entering the electric vehicle market. The company previously said it expects a model by 2024, backed by 1,000 R&D staff working on the project to compete with Tesla, NIO and others in a crowded market. China, the world’s largest smartphone market, also leads in global sales of electric vehicles.

Founded in 2010, Xiaomi has investments in more than 400 companies including Nasdaq-listed iQiyi and Kingsoft Cloud Holdings. It is ranked #291 in the 2022 Forbes Global 2000 list released earlier this month.

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