Operator
ladies and gentlemen welcome to xiaomi's 2026 interim results announcement investor conference call and audio webcast today's conference is being recorded if you have any objection you may disconnect at this time if you have any question and would like to raise during the q a session later please press star one one on your telephone keypad to register your question should you wish to cancel your question please press star one one now i'd like to hand the conference over to your host today miss Isabella Gao from Group Investor Relations and Capital Markets Department please go ahead 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 unordinated 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 Lu partner and president of Xiaomi Corporation and mr. Ellen Lam vice president and CFO of Xiaomi Corporation to start mr. Lu 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'll 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 remains 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 will 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 the first smartphone in Q2 we proactively optimized our product structure and increased selling prices resulting in the 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 a second in Southeast Asia Latin America and Middle East with market share of 19.3 16.2 percent and 13.5 percent respectively we ranked third in Europe and Africa with market share of 16.5 percent and 10.9 percent 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 a second globally wearable products ranked second globally this September will 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 the first in sales among pure electric sedans priced above 200,000 RMB in mainland China as of 17th 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 Quinlan 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 n90 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 refined Xiaomi EV technology using the Norberg ring north sleeve track in June 2026 Xiaomi u7 GT with track package set a new Norberg ring lap 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 the 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 V 2.5 series on 2nd August 2026 CCTV reported on the latest weekly global largest scale model core volume ranking of open router with the Xiaomi Mimo V 2.5 topping the list its core volume increased more than six-fold from 1.5 trillion to 10.5 trillion in two months developers choose me more 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 news we continue to explore how to extend me more from model capabilities to the agent ecosystem in June this year we officially released an open-source memo code and 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 official version of Xiaomi Mimo claw and partnered with Kingsoft office ecosystem to launch a full chain document office efficiency improvement solution at the same time we officially released me local 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 sing thus exploring a new form of smart home in greater depth benefiting from the continued growth in core volume our API calls and token plan began contributing revenue this quarter will 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 hyper OS 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 self-developed memo model and the AI driven transformation of the OS HyperXiao i has been fully upgraded to HyperXiao i 2.0 bringing a brand new interactive experience with the island and inspiration bar features while also offering two modes quick and expert the powerful expert mode with his comprehensive integration with operating system applications can seamlessly come complete complex tasks across applications and devices for expert mode we've launched a HyperXiao i 2.0 expert mode points 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 not 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 dash 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 one 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 Cantar 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 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 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. We remain committed to our goal of becoming a global leader in next-generation hardcore technologies and continue to increase our investment in hardcore technologies 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. Liu. In Q2 2026, our total revenue was 108.9 billion RMB. Our growth margin was 19.8% our mobile times AIOT segment revenue was 84 billion RMB smartphone times AIOT segment gross margin reached 20% 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 forty two point one billion RMB accounting for thirty eight point seven percent of total revenue our global smartphone shipments reached thirty one point two 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 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 percent 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 R&B $9 billion. Gross margin for Internet services this quarter was 76.8%, up 1.4 percentage point year-on-year now let me turn to smart EV AI and other new initiatives for this segment revenue was 24.9 billion RMB this quarter up 17.1% year-on-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 segment was 19.2% this quarter in Q2 2026 we continued to increase investment in AI and other new initiatives results 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 11.7 billion Hong Kong dollars 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% 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 meets the stringent standards for automotive structural components it has already been mass-produced and applied to the new generation sue 7 series and Xiaomi u 7 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 markets in terms of disaster relief in July 2026 Wangxi Hubei Gansu Lianning Jilin Hubei 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 thank you Alan we will now proceed to the Q&A session please limit your questions to a maximum of two so that we could allow more investors to ask questions the Q&A session is now open to register your question please press star one one on your phone keypad should you wish to cancel your question please press star one one first question is from Morgan Stanley Andy please thank you thank you mr. Lu and Alan for the resource presentation I have two questions first about smartphone in Q2 we saw that memory cost continued to rise significantly that's the overall background in the industry in Q2 for your resource your smartphone ASP rose to record high even though shipment came down however the two factors offset one another so the scale exceeded 40 billion gross margin 8.5 percent after this test in the first half can you say that Xiaomi smartphone business is such that price shipment and gross margin can be dynamically balanced in the coming quarters Xiaomi can continue to raise price and control volume and improve product mix in order to maintain the stability of your smartphone business can you do that that's my first question thank you 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 cost 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-level phones they are subject to the biggest blow or threats so for the memory version looking at q2 cost well smartphone retail price of over 1,500 yen is being subject to the impact of memory cost not to mention other costs so that means that for entry-level product it has to be sold at 2,000 yen if we talk about normal memory capacity and 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 shipments 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 yen and then our gross margin was at 8.5 percent so I think last time you are all worried about our gross margin however we still kept it as 8.5 percent 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 red me flagship products well in the past we launched in October now we advanced it to August so pro max and came a pro are launched together so I think they are doing well for came a 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 percent 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 sue seven is very small so looking at the the duplication situation I think we are talking about the drivers we attach importance to driver's experience for sue seven 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 zoo seven buyers this is a clear unique point 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 satisfy many scenarios and so i think in terms of order expectation we are optimistic thank you mr lu very clear answer thank you timothy jiao 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 v2.5 after that well it is well received by global users in terms of token call volume at the end of July in in one week we came first globally and monthly call volume also reached number one globally we think that this is this means that global developers had really voted for our model and then when it comes to a 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 will 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 shall 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 me more 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 Ellen my second question is about Evie and new initiative segment gross margin in Q2 there is volatility on the year-on-year and quarter-on-quarter basis so can you give us a breakdown on the gross margin what are the reasons behind the volatility in Q2 what would be the impact on AI gross margin can you give us an analysis for n17 and 19 max pre-sale price after it is launched feedback has been positive in Q3 Q4 what are some factors that will affect gross margin of EV and other new initiative gross margin regarding gross margin well you can see that our gross margin had to fluctuate it on a year-on-year and quarter-on-quarter basis on the year-on-year basis last year in q2 that was the delivery stage of two seven ultra ultra gross margin is that's a 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 u7 share or breakdown are different from q1 and in the launch we said that sue 7 cost increased quite a lot besides well that's why for two seven delivery when its share is bigger in our deliveries gross 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 you three and q4 gross margin of Sky Nomad okay very clear answer Thank You Alan next question is from Kinna Wong of a city can you hear me yes please go ahead okay thank you mr. Lu and Alan 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 anticipate a 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 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 in at the end of q1 we also advanced some production of new generation sue 7 and in Q2 overall inventory will come down so there is also some impact from EVs okay understood Thank You Alan then I have a question about overseas business IOT overseas revenue increased significantly in Q2 for retail stores overseas you have 600 odd stores this year are you going to follow your original plan to establish stores overseas are you on track in relation to your plan for 2027 there'll be even more products and also EV 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 six hundred thirty 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 ev going global it is on track in the second half of 2027 we'll go overseas and this year we have been to many countries 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 visit many countries and many customers okay thank you thank you thank you for your question next question please when hunting from CICC mr. Lou Ellen good evening thank you for the opportunity I have two questions first internet business this year in q1 and 2 smartphone shipment was under pressure because of memory costs internet service revenue still grew steadily in the future well you have to consider pressure from memory that might be alleviated or that might stabilize so for internet business what will be future growth trend and what will be its gross margin thank you 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 I may use reached 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 ma use premium users account for a bigger share premium users made bigger contribution to our internet art pool more than low end users so when our existing users increase and also with more premium users in share then 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 okay thank you Alan my next question is about AI so what are your thoughts apart from foundational models you also mentioned some new applications you also launched me claw and you said that you are looking into smart appliance so for the overall layout in the future at what time point are we going to see your AI and the overall human car home hardware integration well for late 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 it 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 me local 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 memo and then they would develop independently and they will also be integrated and for our full ecosystem support it would 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 memo 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 Ellen thank you for the opportunity my first question is about the EV market so what is the share of sale of Xiaomi smart EV so what 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 Quinlan architecture and our goals are in relation to the smart EV technology or driving okay thank you my next question is about Evie Evie ESP will it continue to go up and what about your profit situation 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 sue 7 to 7 price is 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 thank you next question please what's I hung leping please I have two questions looking at q2 smartphone ASP it rose 21.9 percent it is at historical high those at three thousand yen or both accounted for a bigger share and for premium products well we saw some decline so if memory costs continue to rise then global smartphone overall situation how will it change in the future when it comes to this product mix what would be your new strategies in the second half this year and next year what would be your product mix trend please okay now let me share with you our judgments first memory is it true that the price will stay high over a long period of time I have doubts but is it much higher than the past low a cost level for memory I think so right now it is five times that of the q2 last year level but it's difficult to stay at this five times level for a long time but how many times eventually it's difficult to say perhaps in the middle so when it comes to smartphone cost and price then we can turn to the overall situation I think we will see a global equilibrium but in the short run it is difficult to give a very precise estimate because this involves different type of war so to speak for example this year Apple adopted a no price increase strategy and some time ago they said that they would also raise price for their coming new flagship phone and some other vendors said that they would also increase price some said they will lower price and so on so in the long run I think people will consider memory costs increase or change in adjusting their selling price 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 am I tend to be more optimistic second question is about robots just now you said you talked about the open-source models and the smart robotic factory had been commissioned already so for Xiaomi robots what is its positioning internally is it a tool to lower cost or in the future will it become a new source of revenue and do you have any quantifiable appraisal targets for this business well I think for robots for final large-scale maturity and development well I think it will take a longer time is difficult to share some short-term goals and secondly we'll continue to invest we are positive about future direction and it is going to integrate with our existing business so that's why we are going to invest in it so up to now we haven't thought of working in the food delivery area with our robotics we have our own factories and then there will be many scenarios in which applications will come out in the future many of our capability realization will be integrated with robotics for example large models they will also be synergized and then ships and also systems I think robot development will also feedback to our large model capabilities so I think we expect a lot of synergy with our other businesses but at this stage I think we we will not set too many concrete or specific goals will be more pragmatic thank you for your questions we'll conclude the session here thank you for your time I hope you will continue to give a strong support to Xiaomi group okay thank you all
