Ladies and gentlemen, thank you for standing by and welcome to Xiaomi 2021 first quarter results announcement conference call. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd like to introduce myself, Ms. Anita Chen, Head of Investor Relations. Good evening, ladies and gentlemen. Welcome to Investor Conference Call hosted by Xiaomi Corporation regarding the company's 2021 first quarter results. Before we start the call, we would like to remind you that the 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 general market conditions is coming 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 call today are Mr. Wang Xiang, founder and president of Xiaomi Corporation, and Mr. Alain Lam, chief financial officer and vice president of Xiaomi Corporation. To start, Mr. Wang will share recent strategic initiatives of the company. Therefore, Mr. Lam will review the business financial performance for the first quarter of 2021. Following that, we will move on to the Q&A session. I will now turn the call over to Mr. Wang. Thank you, Anita. Hello, everyone. Thank you for joining our first quarter 2021 earnings call. In this quarter, we reported outstanding results across all business segments. Our revenue reached RMB 76.9 billion and adjusted net profit reached RMB 6.1 billion, up 54.7% and 163.8% year-over-year, respectively. Both revenue and adjusted net profit achieved historical highs. Throughout this quarter, we remained committed to advancing our core smartphone multiplied AIoT strategy and pleased to share that our global smartphone shipments ranked number three for the third consecutive quarter, with market share of 14.1% in this quarter. Notably, we saw explosive growth in Europe and it ranked number two in the region for the first time. We continued to strengthen our position in premium smartphone market. In this quarter, we further expanded our premium offerings through the launch of Mi 11 Ultra and Mi Mix Fold, priced above RMB 5,999 and RMB 9,999, respectively. Our premium smartphones have been well received by the market as shipments exceeded 4 million units globally in the first quarter of 2021. We continue to deliver cutting-edge technologies and a best experience to our users. For example, our Mi 11 Ultra achieved the global number one DXOMARK position and the first foldable smartphone, Mi Mix Fold, features our proprietary Surge C1 image signal processor, making a significant milestone for our imaging technology and leading us to greater technological aspirations. We also announced our official entry into smart electric vehicle business. The smart electric vehicle represent indispensable components of smart living. Entering the smart EV business is a natural choice for us as we expand our smart AIoT ecosystem and pursue one of the largest business opportunities of the next decade. Last but not least, the first quarter, we also introduced our new logo, which presents Xiaomi's new brand identity. We believe the new brand identity will allow more people to feel and understand Xiaomi's corporate philosophy to let everyone in the world enjoy a better life through innovative technology. Now, I'd like to invite Alain to discuss more details of our first quarter earnings and business updates. Alain, please go ahead. Thank you, Xiang. Good evening, everyone. Thank you for joining us today for our 2021 first quarter earnings call. In the first quarter of 2021, we maintained solid growth trajectory across all business segments. Total revenue grew 54.7% year-over-year to RMB 76.9 billion, and adjusted net profit grew 163.8% year-over-year to RMB 6.1 billion. Our revenue and adjusted net profit both hit record high in this quarter. In this quarter, we maintained a number three position in global smartphone shipments with a market share of 14.1%. Our shipment increased 51.9% year-over-year, the highest growth rate among the top smartphone companies. We have strengthened our position in the premium smartphone market. In March, we released three premium flagship smartphones, the Mi 11 Pro, Mi 11 Ultra, and Mi Mix Fold, and all have been well-received by the market. To illustrate, from January to April of 2021, total orders for Mi 11, Mi 11 Pro, and Mi 11 Ultra exceeded 3 million units. Meanwhile, the Mi 11 series ranked number one in its category among all Android smartphone series in mainland China. In total, we shipped over 4 million premium smartphones this quarter. Our premium smartphones we define as retail prices at or above RMB 3,000 in mainland China and EUR 300 in the overseas markets. Our market share in the premium smartphone category in mainland China grew considerably to 16.1% in the first quarter, up from 5.5% in the first quarter of 2020. Our achievement in the premium smartphone market is underpinned by our relentless pursuit of technology innovation. For example, the Mi 11 Ultra achieved a DXOMARK score of 143 for overall camera performance and ranked number one globally. In addition, it debuted a jointly developed GN2 sensor, the largest smartphone camera sensor currently on the market. In terms of charging technology, Mi 11 Ultra debuted the silicon oxygen anode battery, which enables faster charging in a thinner smartphone body and set a new benchmark with 67-watt wireless charging support. Our Mi Mix Fold is another example of our pursuit of technology innovation. It is equipped with our proprietary Surge C1 image signal processor, which uses advanced algorithms for autofocus, auto exposure, and auto white balance, significantly enhancing the image quality. Additionally, it is the world's first smartphone to use liquid lens technology, which combines macro and telephoto capabilities in a single lens. In terms of display, it is equipped with a flexible 8.01-inch OLED screen, featuring Xiaomi's own color calibration algorithm with impressive color accuracy. In Q1, we further improved our number one online leadership position in China, with our online market share doubling to 38% from 18.5% in the first quarter of 2020. Meanwhile, we rapidly expanded our offline retail presence. As of the end of April, we had over 5,500 retail stores in China, an increase of over 2,300 stores compared to the end of December 2020. As Wang Xiang said, we've also elevated our brand and stepped up our promotional efforts globally. In March, we launched our new Xiaomi logo with the new Alive branding identity, which expresses the relationship between light and technology. At the same time, we invested in brand building in key global markets. In February of this year, massive screens of our Mi 11 smartphone were displayed on three landmark buildings, including Dubai's Burj Khalifa, London's BFI IMAX, and Bangkok's CentralWorld. This move demonstrates our efforts to expand into the overseas premium markets. On March 30th, we'll also made one of our most important decisions in our corporate history, which was our official entry into the smart electric vehicle business. We'll establish a wholly-owned subsidiary with an initial investment of RMB 10 billion and expect to invest around $10 billion over the next 10 years. We believe offering quality smart EV will help us build a closed-loop smart living ecosystem and fulfill our vision to let everyone in the world enjoy smart living anytime, anywhere. We also believe that we have unique advantages to support the smart EV business, including our internet business model, our extensive experience in software and hardware integration, our broad user base, our powerful brand, our distribution channels, and our investment in prior technology surrounding smartphones, which can also be applied to smart EVs, and with our abundant cash resources. These factors will contribute to our future success in the smart EV sector. I would like to give everyone an update with regard to our litigation with the U.S. Department of Defense. As you may have seen from this morning's announcement, the U.S. District Court issued a final order this morning vacating the U.S. DoD's designation of Xiaomi as a CCMC, a Communist Chinese Military Company. In vacating the designation, the court formally lifted all restrictions on U.S. persons' ability to purchase or to hold our securities. We are very grateful for everyone's trust and support, and we will continue to relentlessly build amazing products with honest prices to let everyone in the world enjoy a better life through innovative technology. Let's dive deeper into each segment, starting with smartphone. In the first quarter, our smartphone revenue grew 69.8% year-over-year to RMB 51.5 billion, our highest quarter ever. Our global smartphone shipment reached a record high of 49.4 million units, up 69.1% year-over-year. Our smartphone gross margin also rose to 12.9%, due to improved product mix and fewer discount activities as a result of supply shortage. Let's take a closer look at the Mainland China market. In the first quarter, our smartphone market share in Mainland China rose to number 4. According to Canalys, during the quarter, our smartphone shipment in Mainland China reached 13.5 million units, a year-over-year increase of 74.6%, and with a market share of 14.6%. This is supported by the continued success of our dual-brand strategy, targeting different user segments. For example, our Mi Mix Fold, with prices starting from RMB 9,999, catered to the business executives and power users. To reach the younger generation and female users, we launched our Mi 11 Lite. For gamers, we unveiled our Redmi K40 gaming series with prices starting from RMB 1,999. We believe that this strategy will help us capture greater market opportunity by satisfying the unique demands of the different user groups. With respect to the IoT and lifestyle product business, our revenue increased by 40.5% year-over-year to RMB 18.2 billion in the first quarter of 2021. As a leading global consumer IoT platform, the number of connected IoT devices on our IoT platform reached 351 million, up 35.6% year-over-year. Moreover, the number of users who have five or more devices on Xiaomi's IoT platform reached 6.8 million, up 48.9% year-over-year. Our AI assistant MAU reached 93 million, an increase of 31.9% year-over-year. Lastly, our Mi Home app MAU reached 49.2 million, which was up 22.8% year-over-year. We continue to expand and upgrade our IoT product portfolio to offer the best user experience and to further promote interconnectivity across devices. In the first quarter, we launched new products with distinctive features, including Mi Notebook Pro 15, featuring a super retina OLED display with 3.5K resolution, and Mi Router AX9000 with dedicated 5G spectrum. In the smart home category, we launched our Mi Smart Air Conditioner with ventilation, with prices starting at RMB 3,599. It is an innovative next-generation air conditioner that takes clean, fresh air from the outside and to effectively lower indoor carbon dioxide levels, bringing our users a more healthy and comfortable experience. It also doubles up as an air purifier that achieve 90.9% air sterilization. This smart air conditioner is also the industry's first to win a Red Dot Design Award. In mainland China, our IoT products deliver outstanding results across multiple categories. This shows that we have become an increasingly important part of our users' daily life. Notably, our air purifiers ranked number one with 52.5% market share. Our Mi Bands ranked number two with market share of 37.5%. Our smart locks ranked number one with market share of 24.8%, and I can keep going on the list. Meanwhile, the IoT segment continued to grow in the overseas market. In the first quarter, revenue from our IoT products in the overseas market increased 81.1% year-over-year, as we strengthen our brand and increase our penetration in the key markets. We continue to enrich our overseas IoT portfolios and introduce a variety of cool products, such as our Mi Electric Scooter Pro 2 Mercedes-AMG Petronas F1 Team Edition. Our IoT product portfolio has great potential in the overseas market, which we believe will be a key driver of future growth in our business. With respect to the internet services segment, revenue from internet services reached RMB 6.6 billion, up 11.4% year-over-year. Our advertising revenue hit a historical high this quarter, reaching RMB 3.9 billion, primarily due to higher pre-install and search revenue on our premium smartphones. Gaming revenue decreased year-over-year, as mentioned by Wang Xiang, mainly due to the higher base in the prior year. Due to the strong gaming industry performance during the pandemic. Also, revenue from our other value-added services decreased as we voluntarily reduced the risk on our FinTech business. If you look at our global internet user base, it has continued to grow and drive our internet services businesses. In March of 2021, the global MAU of MIUI increased 28.6% to 425.3 million, while the MAU in mainland China rose to 119 million, up 6.4% year-over-year. Our TV value-added service offerings continue to expand and includes video entertainment, e-learning, kids mode, and karaoke, providing diversified content to a wide user group. During the pandemic, our education channel also offered live-streaming educational courses for free, providing a convenient learning option for kids at home. In the overseas market, our internet services revenue increased 50% year-over-year in the first quarter, accounting for 13.8% of total internet services revenue. This was driven by increasing overseas smartphone shipments and the expansion of our overseas business. Notably, the MAU in Western Europe grew 95.5% year-over-year, and our Mi Browser business is also expanding in these key overseas markets. Talking about the overseas business, in the first quarter, our overseas revenue increased 50.6% year-over-year to RMB 37.4 billion, which accounted for 48.7% of our total revenue. According to Canalys, our smartphone market share ranked number 1 in 12 markets in the first quarter and ranked in the top five in 62 markets worldwide. For instance, in Spain, we ranked number one for the fifth consecutive quarter, and we also ranked number one in Russia for the first time this quarter. We have further expanded our scale in the key overseas regions. Our smartphone market share in Europe climbed to number two for the first time this quarter. Our ranking in Latin America and Middle East both rose to number three, and we maintained our number two position in Asia-Pacific. I would like to further highlight our excellent performance in Europe this quarter. As I mentioned before, we ranked number two for the first time in Europe with a market share of 22.7%, as our smartphone shipment increased 85.1% year-over-year. In Spain, our smartphone market share reached 35.1%. In Italy, our ranking surged to number two with a market share of 25.2%. We also maintained our number three positions in France and Germany, with year-over-year growth exceeding 100% in both markets. We continued to deliver strong results in both the carrier and online channels overseas. In the first quarter, excluding India, our overseas smartphone shipments through the carrier channel exceeded 5 million units, up more than 310% year-over-year. As of March 31st, we cooperated with over 150 carrier channels worldwide. At the same time, our smartphone market share in Western Europe carrier channel surged to 11.3%, compared to 7.4% in the fourth quarter of 2020. In the online channel, our overseas smartphone shipments, excluding India, also exceeded 5 million units, up more than 100% year-over-year. Let's move on to the financials. In the first quarter, as I mentioned before, our revenue reached RMB 76.9 billion, up 54.7% year-over-year and 9.1% quarter-over-quarter. In particular, revenue from smartphone grew to RMB 51.5 billion, up 58.9% year-over-year and 20.8% quarter-over-quarter. Revenue from IoT and lifestyle product reached RMB 18.2 billion, up 40.5% year-over-year. Our revenue from internet services reached RMB 6.6 billion, representing an increase of 11.4% year-over-year and 6.4% quarter-over-quarter. As you may have noticed, our gross margin have shown strong growth momentum during the last quarter. Our overall gross margin increased to 18.4% in the first quarter. If you look at the gross margin for our smartphone segment, it grew to 12.9% in the first quarter from 8.1% in the prior year. The gross margin for IoT and lifestyle product increased to 14.5%, and the gross margin for our internet services segment increased to 72.4%. During the quarter, we continued to step up our investments in brand building and R&D. Our R&D expenses increased by 61% year-over-year to RMB 3 billion. We remain dedicated to pursuing the cutting-edge technology for our business, and we expect to recruit another 5,000 engineers in 2021. We saw robust growth in our adjusted net profits in this quarter. We reached a new record high of RMB 6.1 billion, up 163.8% year-over-year, 89.4% quarter-over-quarter. Our adjusted net profit margin climbed to 7.9% in the first quarter from 4.6% in the same period of 2020. We maintain our efficient approach to managing our working capital. Our AR turnover days decreased to 13 days in the first quarter of 2021. The inventory turnover days were 65 days in the first quarter, and our AP turnover days increased to 111 days in the first quarter. Overall, our cash conversion cycle was very healthy at -33 days. Last but not least, our strategic investments enable us to generate additional earnings growth. We continue to enrich our investment portfolio. For example, in the first quarter, we invested in Dongyi Risheng Home Decoration, a premium home decoration solutions provider, which also established strategic cooperation with our IoT Smart Living ecosystem. As of the end of the first quarter, we had invested in more than 320 companies. We generated an after-tax net gain of around RMB 400 million from the disposal of investments during the quarter. As of the end of the first quarter, the total value of our investment is close to RMB 70 billion, which if you look into it on a per share basis, represent about HKD 3.3 per share. We'll continue to leverage our resources and our ecosystem to invest in more ecosystem companies, further empowering the entire manufacturing industry in China. Thank you, Alain Lam. 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 their questions. Thank you. The Q&A session is now open. To register your questions, please press star one on your telephone keypad. Should you wish to cancel your question, please press star two. The first question comes from Leping Huang with Huatai Securities. Please go ahead. Thank you. Okay. Thank you for taking my questions. My first question is about the chip shortage and the inventory issues. Chip shortage has been a major problem for the tech industry for the last few months, but we also see some weakness in the smartphone demand, especially in China and India recently. When I look your financial statement, I saw you have a large increase in your raw material inventory, but a large decline in the finished goods inventory. Can you comment, Xiaomi, comment on this, and Alain Lam, at this point of time, what is management's view on the impact of the chip shortage and inventory, and what's the impact on your future growth? Thank you. Thank you for the question. Actually, the shortage, it happens every three to four years in the semiconductor industry. This time it's stronger because of many factors. One factor is the pandemic, right? We are working very hard with our suppliers, try to, how to say, optimize our supply situation and do some preparations for the future. That's why our inventory level, I think in general, it's very healthy. We do some preparations for the shortage for the second half in the raw materials. Yeah, that's for sure. Overall, I don't see any issues for this year. It's not going to be a major problem. Even with the shortage, actually, we think we can still have a big or a significant increase compared to year 2020. That's this question. Your second part of the question is how long is it last, right? I think to be very honest, I think for this entire year, 2021, I don't think the issue will be resolved within this year. We can expect maybe second half of next year, the supply environment will be changed because the whole industry is working very hard, actually, to try to improve the manufacturing capacity. Not only for the SoC suppliers, but also memory, also display. The whole industry actually is working on that. Maybe second half of next year it will be improved. This is our will. Regarding to the market, actually, we know recently we've noticed there are some companies or some research agents or institutions, they are seeing the soft demand in the China market for smartphone. We monitor the market environment very closely. So far, we don't change our plan. We'll keep our plan for 2021, but we are closely monitor the market demand dynamic. I think a couple of additional points. One, obviously, I think the entire street, not just in our industry, but also in other industries, we are seeing chip shortage, right? The auto industry, for example, due to a demand shock, right? There are more demand from these new EV players, laptop players due to the pandemic have been increasing demand. The supply was slow in catching up, right, because of the pandemic. They haven't really spent that much CapEx in terms of building new capacity. I think that would take a while for that to normalize. As Wang Xiang said, probably could till next year, for the chip shortage to ease. Obviously, as Wang Xiang also mentioned, right, number one, we have been investing strategically, right? As you noted, some of our raw material inventory has increased. At the same time, I think, the fact was our, as you'll also see, the finished goods inventory has dropped, because our products remain very popular with our user base. I mean, from a management standpoint, we are trying to optimize our product portfolio. We are trying to make sure that we strategically optimize our margin as well in our business, due to our enhanced product portfolio as a result. Yeah. The second question, Wang Xiang, I think I asked the same question maybe roughly one years ago. Your room of growth, you actually deliver very strong growth in last one year. When you calculated the number, you already shipped 50 million unit of smartphone this quarter. If you multiply by four, it's 200 million, whereas Samsung's only 200 million, which I think you are already very close to global number two. Where you plan your geographical expansion and where you plan your product mix? Where's the room coming from now, and especially, do you plan to enter market like United States, and do you plan to have a much bigger market share in the premium segment, like which country is dominated by your Apple and Samsung? Yeah. Actually, we see a lot of room to grow in many, many markets. Take Europe as an example. Right now, entire Europe, we rank number two. This is significant milestone for us. Our market share now in entire Europe is over 20%. We still think we still have a good room to grow because in Western Europe, our market share is less than 20%. I think it's about maybe 18%. Western Europe, we see very big room to grow there. Right now, we are number one in Spain for five consecutive quarters with market share about 35%. We are number two in France, in Italy, number three in Germany. All those market, we all see a huge potential to further grow. That's one area. Another angle is our growth in the carrier channel was very, very strong in Q1 2021. We just started carrier business. Our market share in carrier channel is still very low, but our growth is over 100%, maybe 300% in Q1. It's a very strong growth. You see the trend that we're going to grow our smartphone shipment in the carrier channels. That's another potential. If you look at the China market, right? We are about 33% in China online market, but we are still not very high. We don't have a very high market share in the offline market of China. That's why we are putting huge effort to establish our offline channels in retail stores across the country. That's another big area to grow. Other example, including Russia, including Latin America. We also see a very strong potential to grow. Yeah, we are happy to share that. Last year we ship maybe over 140 million units. This year, even with the shortage, I think we're very confident to have a significant growth in the smartphone market. U.S. U.S. market is always very attractive to everyone. Right now, we put our focus on the European market now instead of North American market because of resources issue. We will continue to increase our investment in R&D so that we have more resources. When we are prepared, we'll go to North American market. So far, we haven't announced any plan yet, but that market definitely attractive market to us in the future. Okay. Thank you very much. Thank you. Our next question comes from Tina Wong with Credit Suisse in Hong Kong. Thank you. Thanks for taking my question. Congratulations for such a good, strong result. I have two questions. One is about the smartphone gross margin, which already reached 12.9%, is a very encouraging level. We wanted to see is how much is actually from the serial sales promotion better mix, and also somehow if there's any impact actually from some finished good that already, actually based on lower cost, but right now your cost maybe increase on the chip tightness. What should we expect going forward in the coming quarters? I think the chip tightness will still stay this year, and probably will resolve second half next year, as Wang Xiang mentioned. Is that a sustainable margin level? This is the first question. The second question is about the internet business, because we do see the advertising revenue grew very strongly, was at 46%. Gaming also actually exceeds I think the expectation in the street because it's up 24.8% on a high base last year. Last year is actually due to lockdown in China. We see gaming got impact from the commission base change and also high base, but still achieved such high growth here. I just wonder if that is because the better mix in the smartphones and/or expanding your channel in internet business. When should we expect the normalization in the FinTech impact? They continue to decline for some time, and it should be getting less impact to the overall internet business. This is it, yeah. Two directions of my question. Thanks. Yeah, thank you for the question. I'll take first one. Alain Lam will answer the second one. The first one is regarding to the gross margin, the sustainability of the gross margin, right. I think as a company, right now our focus still to increase our market share globally. We're not targeting to increase the gross margin. Gross margin is good. We like gross margin. Our first priority is to enlarge our market, to increase our customer base. I think we achieved a very good gross margin for last quarter and this quarter because we have a much better product and a product mix. We have many very strong mid and higher tier products that contribute reasonably the gross margin. Also during the shortage, everyone in the market were all not very aggressive on pricing. That also help us to maintain a healthy margin. Overall, we will focus more on the customer base and market share instead of the margin. With very good product and the product mix, I think we'll maintain a healthy gross margin and profit. Yeah, look, I think, Tina, on the internet services, the advertising, as you noted, has performed very well. Part of it is really due to the growth of premium smartphone within our portfolio, right? I mean, obviously command a much higher pre-installed as well as much higher revenue potential. On the gaming side, it has done very well. I think seasonally Q1 has always been a strong kind of gaming quarter anyway with many people at home during Chinese New Year. It also exceeded the Q4 by quite a lot. I think as I mentioned in previous call, it's hard to compare with year-over-year, given the particular factors in Q1 of last year. It's always hard to beat that number, but we're very glad that it beat the Q4 numbers by a pretty healthy margin. Also, as you rightly pointed out, the move to premium smartphone also generated a higher gaming GMV, as we showed in previous quarters. On the FinTech side, again, as I stressed before, it's again hard to compare year-over-year, given there's quite a different business model compared to a year ago. That's why we try not to compare it year-over-year. I think as we continue to decrease our use of balance sheet, as we continue to decrease the overall use of the loan product, I think you'll probably see a healthier pickup in the second half of next year. It also kind of dependent on all these regulations that are going on. I think we're trying to do everything we can to comply with what the regulators have set for us. It may still have some twist in the overall FinTech model before it settle down due to the ongoing regulatory scrutiny. Thank you. Our next question comes from Andy Meng with Morgan Stanley in Hong Kong. Thank you. Thank you, Wang Xiang and Alain Lam, for the detailed presentation, and a congratulations on the great result. I'm Andy Meng from Morgan Stanley. I have two question. I'll ask the first question. It's focusing on the offline expansion. We know Xiaomi having opened lots of new store offline. I want to know what's the latest status regarding the operation. Is the high inventory turnover strategy working well, or do we receive any pushback? In recent days, we also noticed that we having start some promotion on certain smartphone product. Whether our online and offline will apply the same promotion or they have different strategy. For the offline, if they have already built inventory, based on the previous price, when we're having the promotion, will the offline also having the same price cut promotion or the distributor have to bear this inventory cost by themselves? This is my first question. Thank you. Yeah. This is a very good question. It's a complicated question. Maybe let me answer the second part of the question. Actually, this time, actually, we have done a lot change in the offline strategy. We synchronize online and offline. Whenever we do a promotion, no matter it's online or offline, that's one action. We will do the same promotion at the same time, with same price. They're synchronized. We can synchronize this time because we do a lot of changes, a lot of innovations, right? Actually, we develop a system which can track the pricing, the sell and the sell out real-time for every store. That's why we can manage the promotion very efficiently. The situation in the past is because, without the technology, how to say? The tools, sometimes we cannot synchronize the price online and offline, create some problems with our partners. This time, the situation will be changed with the technology. I think we are seeing the acceleration of the offline stores build up. Up to now, I think the latest number show that we have over 5,500 stores in operation already. We continue to build the stores in a very higher pace. I remember last year, end of last year, we had 3,000 stores, but now we have 5,500 stores. We're going to build much more stores by the end of this year, probably over 10,000 stores. We want to cover every, how to say, town in China. With the technologies, with the partners, I think we're able to do it. With those stores, we can build our, how to say, point of sales. With the point of sales, we can sell a lot more phones, which online channel cannot cover. I just mentioned earlier, we have 38% of China online smartphone market. In offline, we still have a much bigger room to grow. With the 10 million or even 15 million stores in the future or more stores, we can cover those territories to let those people living in those small villages comes to buy our product more conveniently. That's our plan. Thank you, Wang Xiang. My second question is based on communication with investor. I think most people are definitely very excited about the first quarter upbeat result, but at the same time, we're worried about the second quarter or even second half slowdown. What will be the company's strategy in the second quarter or second half to try to sustain the strong performance, no matter from the revenue, shipment, and margin perspective? Something we are discussing, like possibility, for example, we have the weakness in India. That's something macro-driven. We cannot control the outbreak of COVID, but is it possible to ship more volume to other market with high growth potential like Europe? In that case, if the Europe market margin is higher than India, it could even generate a better profit for the company. Those are the potential solutions. I think the company management probably will have more to share with us to let us know what will be the company's operating strategy in the second quarter or the second half of this year. Thank you. Yeah. Actually, because we have multiple markets, that means we have a big room to play to optimize our supply. I think that's our strength. We definitely will optimize our supply to help our channels and the regional market. We are working very hard on that. For India market, actually, right now the challenge is the pandemic. The whole company is doing very hard, try to do our best to contribute to the society to, how to say, to help them on the difficult challenges. At the same time, we will use the different channels, try to ship smartphones. In India, actually, there are many, many provinces, they are 100% locked down, but they are another part of the half of the country. They can still use online channel to ship products. We are working with those channel partners to ship our smartphones to the people who may need it during the pandemic. The manufacturing right now is stabilized. Yeah, we are working with our partner there, trying everything possible to stabilize the supply. At the same time, we will optimize our supply chain. That's the very important thing for us. Thank you very much, Wang Xiang. Yeah. Thank you. Our next question comes from Gokul Hariharan with JP Morgan in Hong Kong. Thank you. Yeah, thanks. Congrats on the great results. The first question I had was on smartphone. Given the aggressive push into the offline channel, especially in China, do you start to feel the need to potentially create offline specific products or specific brands, like some of your competitors who had much bigger market share at one point in time in China had done? Is that something that we are thinking about as we start to increase our presence in offline? Actually, right now we are using the same product portfolio to sell the same product portfolio online and offline. We notice that for the mid and high-tier product, maybe many consumers, they want to feel and touch. They want to buy from offline. Yeah, we are making that effort to do a better demo, so that our customers, even in the rural areas, can see the device, can feel and touch the device before they make the purchasing decision. This is what we are trying to do. We are still maintaining the same product portfolio for online and offline. You don't see the demand for a different kind of product portfolio offline so far from the distributors or your customers? Our offline model actually is we build the stores together with our partners. We are not using the traditional distribution channel a lot. Actually, we work directly with the retailers, the partners, to build a store in the tier 1, tier 2, tier 3, tier 4, tier 5 cities and the counties. In the tier 1 cities, actually, we have our store, our flagship store in the shopping malls, right? Right. In tier 4 to tier 6 cities, normally we find a partner to build a store together with us. Actually, they are responsible for finding a place to hire their staff and do some of the decorations, renovations for the store. Xiaomi, we will send a store manager. It's on our payroll, our own employee to be the store manager. Also, we help them on the furnitures, the decorations, the billboards. More importantly, we provide the tools I just mentioned, very powerful tool for retailers, so that will help our partner to manage their inventory and the promotion so that they can focus their effort to sell the product. That's the two parts. Okay. That's pretty clear. My second question is on the internet services. I think the gross margin we're seeing is probably the highest we've seen for quite some time. What movements that gross margin make? Is it just that advertising is a much higher margin product compared to everything else? From a growth perspective, should we see first half of this year to be kind of like a bottom in terms of year-on-year growth for internet services and expect a reacceleration as we get into the second half of this year, given the internet finance related scale down is probably largely done? Look, Gokul, I think the combination. I think the gross margin being high in the first quarter was, one, as you rightly said, the advertising gross margin. Yeah. Second is the recovery of the FinTech gross margin as well. We remember last year, the first quarter was probably a lot of loan provisions and whatnot, right? Yeah. The margin was not as good, and it dragged down the overall margin. I think this year, this first quarter, even though the overall revenue for the FinTech business was lower, the margin has actually ticked up as the credit cycle in China improved. Right. I think those are the two key factors. I think in terms of what's going to happen for the internet services over this year, I do think that you start to see that picking up in the next three quarters as we continue to generate a good proportion of revenue coming from the advertising business. As our base continues to grow and as our MAU-- Nobody asked us MAU question so far this quarter, you guys might be happy with that. As our China MAU continues to grow, that will probably bring a higher percentage of revenue from advertising overall, and then the gaming recovery or normalized comparison as well as the FinTech comparison being more normalized. We will certainly see the second half of the internet services being better than the first half. Got it. Yeah. Thank you very much. Thank you. Thank you. Thank you. Our next question comes from Timothy Zhao with Goldman Sachs in Hong Kong. Thank you. Thank you. Can I just dwell on the last point you just made in response to Hari's question about the MAU? If I look back at all of your quarters for the last three years, you've never grown your MAU in China the way it's grown in the first quarter. This probably explains the strength of the quarter's internet revenue as well as the higher gross margins. Could you just take us through what was so different about this quarter that led to almost 8 million adds when we've never seen anything even, I think you've got to go back three years to see a number at 5 million a long, long time ago. What was different in the quarter that made that difference? Also, you talked about the premium that you earn with high-end smartphones. Could you give us a feel for, is it a factor of three, a factor of four, a factor of five that comes through because of the high-end customer who comes on board? My third question is on the smartphone side. You've built out a vastly improved distribution network in the offline space. Could you give us a feel for what percentage of the offline business, offline sales of smartphone you're capturing? Give us a feel for how this premium end of customer base is coming on board. Where is it coming on board from? Online, offline, or is it just the simple fact that you've got a far better range of smartphones, or it was with the Mi 11, it was really three products being launched simultaneously that led to 3 million sales? Just take us through the dynamics, if you would, sir, please. Thank you. Yeah. Timothy, let me try, and then Xiang can add to it. I think first of all, the growth in users, as we previewed in our previous call, was really due to a large number of new Xiaomi users. People who haven't used Xiaomi phones before. Xiaomi 11, for example, was very popular. In last quarter, we did talk about a large percentage of those buyers being new Xiaomi users. The kind of new phones we launch are trying to address a different user base as well. Whether it's the premium end users, whether business users, whether it's the female demographics, whether it is the gamers. Our product lineup, not just more product, but also kind of different products targeting different segment and different demographics. I think that's probably key to attracting a lot of new users to Xiaomi that haven't previously used a Xiaomi phone before. I think that leads to a larger number of new users, a large increase in MAU for this quarter. Right. That's the first question. Second question is to give you a sense of advertising difference between premium phones and the mid to low-end phones. We can tell you that, for example, pre-install, which is not a big part of the advertising revenue, but just an illustration. We probably see three to five more apps that we can pre-install on a Xiaomi phone versus a Redmi phone, just to give you an illustration. In terms of the space and people willingness to buy those spaces that we offer. In terms of unit pricing as well, I think you probably see a 10%-20% difference in terms of unit pricing for each of those apps. Factor into both a larger number of apps that you can pre-install that people are willing to buy and a higher ARPU or a higher unit price for each of those apps. That gives you a sense in terms of how much we can generate. Not to mention the other revenue like search and gaming and whatnot. I hope that, probably not 4x or 5x, I don't think, but it's a decent premium. In terms of the offline smartphone sales and online smartphone sales, look, I think the offline sales is still very early for us. We are what, 5,500 stores right now? 5,500 stores. Yeah, 5,500. If you look at our competitors, they're probably more like 50,000 to 100,000. Maybe RMB 100,000. 100,000 stores. We're still very early. If you look at our market share in the offline market, it's still very low. Yeah. Right? Yeah. Even though our online market share is very high right now. I think it's across all channels. Obviously, we're still selling more online than offline at this point in time, but we want to change that ratio. That's why we want to build 10,000+ stores this year. Yeah. To capture that opportunity. Did that make sense? Also, you see, actually online market represent probably 30% of the entire China smartphone shipments. The offline is 70%. In those 70%, right now we are only probably seven, maybe seven something% of the share. That means we have huge room to grow in the offline market if we want to be number one. That's why we are working very hard on the offline strategy and execution. I think one of the issue for us is we are in the, as Alain Lam mentioned, we are in very early stage of the offline development. Actually, the coverage is our current priority. We want to increase the coverage. We want to let the people who want to buy our product, they can find a store, our store, especially in the rural areas, not only tier 1, tier 2, tier 3 cities, but those counties and the towns. We got to make the coverage there. After the early May, I visit Hubei province. I visit town and the villages. I see the demand there. We must have a coverage to build the cover in those areas so that we can make actual sales in those areas. That means huge potential for us. Thank you. Thank you. This concludes the conference call today. Thanks again for joining us. You may now disconnect.