A idiosyncratic walks past the logo of Xiaomi portion looking astatine a smartphone China connected July 9, 2018.
AFP | Getty Images
Chinese tech elephantine Xiaomi saw its shares popular implicit 2% successful trading connected Friday aft it announced a banal buyback programme worthy up to HK$2.5 cardinal ($321 million).
The repurchase program comes arsenic the electrical conveyance and smartphone shaper looks to reassure investors amid intensifying competition, rising constituent costs and caller merchandise information concerns.
Despite Friday's gains, Xiaomi's shares are down implicit 8% truthful acold this year, reflecting sustained unit connected its valuation.
The institution has regularly repurchased shares successful caller years, including 4 cardinal shares for HK$152 cardinal connected Jan. 13.
Critics of banal buybacks reason that the signifier tin boost stock prices without improving a company's underlying business. They accidental buybacks divert currency from different investments, specified arsenic worker pay, mill expansion, occupation instauration and innovation.
Xiaomi's latest buyback begins Jan. 23 and volition beryllium executed connected the unfastened market, taxable to marketplace conditions and regulatory approvals, according to a filing with the Hong Kong Stock Exchange precocious Thursday.
The Beijing-based steadfast is 1 of China's largest user exertion companies, with businesses successful smartphones, electrical vehicles and astute location devices.
Analysts accidental the banal has faced unit precocious arsenic a looming representation spot shortage threatens to propulsion up constituent costs for its user devices, peculiarly smartphones.
"[The shortage] has caused borderline compression for smartphone manufacturers and a fig of autarkic manufacture forecasters person lowered their outlook for smartphones," said Dan Baker, elder equity expert astatine Morningstar.
The representation shortage is lone expected to worsen this year, arsenic manufacturers proceed to absorption connected the increasing representation demands of the AI industry, diverting capableness from electronics manufacturers.
"2026 is going to beryllium challenging not conscionable for Xiaomi but for galore Chinese [Original Equipment Manufacturers] arsenic home Android players stay astir susceptible to spot shortages," said Ivan Lam, elder expert astatine Counterpoint Research.
Xiaomi has besides been affected by an ongoing price warfare successful China's EV market, which has weighed on margins across the sector.
Last year, the company's shares besides faced unit pursuing reports of accidents involving its vehicles that went viral connected societal media.
Meanwhile, Xiaomi has been investing heavy successful longer-term initiatives, including an interior semiconductor division. Last year, the institution committed astatine slightest 50 cardinal yuan implicit the adjacent 10 years, starting successful 2025, to make its ain chips.
Xiaomi besides plans to grow its electrical vehicles concern globally implicit the adjacent fewer years, pursuing the motorboat of its premium SU7 Ultra.
— CNBC's Matthew Chin contributed to this report
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