Ladies and gentlemen, thank you for standing by, and welcome to Xiaomi 2021 Interim Results Announcement Conference Call. Today's conference is being recorded, and if you have any objections, you may disconnect at this time. If you have any questions you would like to raise during the Q&A session later, please press star one on your telephone keypad to register your questions. Should you wish to cancel the questions, you can press star two. I'd now like to hand over the conference call to our host today, Ms. Anita Chen, Head of Investor Relations. Please go ahead, Ms. Chen. Good evening, ladies and gentlemen. Welcome to investor conference call hosted by Xiaomi Corporation regarding the company's 2021 interim 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 financial prepared in accordance with IFRS. Joining us on the call today are Mr. Wang Xiang, Partner 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. Thereafter, Mr. Lam will review the business and financial performance for the first half of 2021. Following that, we'll move on to the Q&A session. I will now turn the call over to Mr. Wang. Yeah. Thank you, Anita. Hello, everyone. Thank you for joining our 2021 second quarter earnings call. Firstly, I'm very excited to share with you our remarkable results we achieved this quarter. Building on our strong growth momentum, both quarterly revenue and adjusted net profit reached record highs. Our total revenue reached CNY 87.8 billion, and our adjusted net profit reached 64% and 87.4% year-over-year, respectively. We have been included on the Fortune Global 500 list for the third consecutive year, ranking 338 in 2021, up 84 slots from last year. Our smartphone business achieved significant milestones, this quarter. We became the world number two smartphone company in terms of global shipments, as we increased market share across all key regions. Notably, we ranked number one in Europe for the first time and increased our market share in the region to 28.5%. Our premium smartphones continue to gain popularity and attract new Xiaomi users. In the first half of 2021 alone, our premium smartphone shipments exceeded 12 million units globally, compared with around 10 million units in all of 2020. To further advance our smartphone multiplies AIoT strategy, we recently launched multiple exciting new products. This includes Xiaomi MIX 4, our new premium smartphone featuring a stunning full-screen display with camera under panel. Xiaomi Pad 5 Series, our first tablet since 2018 in smart speaker. Also CyberDog, our first bio-inspired robotic companion. All of these products reflect our relentless pursuit of technological breakthrough in our premium products. Our ability to offer innovative technologies comes from our people. To recognize employees who have made outstanding contributions, in July, we announced two equity award grants totaling about 190 million shares to about 4,000 participants. We believe this is an important step for us to attract and retain the best talent and allow us to maintain our long-term technology leadership. We owe our success to our users, and user experience has always been our priority. To celebrate the 10-year anniversary of Mi 1, our first smartphone, we decided to give back to our first group of Mi 1 customers the CNY 1,999 they paid to demonstrate our deep gratitude for their support. Going forward, we'll continue to be friends with our users and offer the coolest product and services to them. Now, I'd like to invite Alain to discuss our second quarter earnings and the business updates in greater details. Alain. Okay. Thank you, Xiang. Good evening, everyone. Thank you for joining us today for our second quarter 2021 earnings call. As Xiang mentioned, building on our momentum recently, we delivered another set of record-breaking results in the second quarter. Our revenue and net profit, our global market share, user base, and our IoT platform all achieved remarkable growth in this quarter, which I'll discuss in more details in this presentation. We achieved record quarterly revenue and adjusted net profit this quarter. In the second quarter, our total revenue grew 64% year-over-year to CNY 87.8 billion. Our GAAP net profit grew 83.9% to CNY 8.3 billion, and our adjusted net profit grew 87.4% year-over-year to CNY 6.3 billion. Recognizable brands worldwide. Xiaomi has been included on the Fortune Global 500 list for the third consecutive year. This year, we ranked 338, up 84 slots from last year. We were also selected among BrandZ total top 100 most valuable global brands, again, for the third consecutive year. We ranked 70 this year, up 11 slots from last year. Our smartphone market share. In the second quarter, we achieved the number two position in smartphone shipments with a market share of 16.4%. Our global smartphone shipment increased 82.9% year-over-year, which again, was the highest growth rate among the top smartphone companies. Similarly, we continued our stellar growth in the mainland China smartphone markets. Despite a year-over-year decline in the overall market, our mainland China smartphone shipment grew 35.1% year-over-year. Again, the highest growth rate among the top smartphone vendors. As a result of this, we rose to the number three position and improved our market share to 16.8% in the last quarter. The robust performance of our smartphone business was supported by our increasingly competitive position in the premium smartphones markets. Our premium smartphone shipment exceeded 12 million units globally in the first half of 2021 alone, compared with around 10 million units in all of 2020. If you look at this chart, we've expanded our market share in mainland China across multiple RMB and above. Our ability to continuously up to our investment in R&D. In the second quarter of 2021, our R&D year-over-year to reach CNY 3.1 billion. The latest example of our technology innovation is well represented by our Xiaomi smartphone that we launched on August 10th. Equipped with the camera under panel technology, MIX 4 had a full screen display that allows the front camera to be completely the first domestic smartphone to support the UWB point-to-connect technology. Our AIoT products, such as our smart TVs and our smart speakers and robotics. CyberDog leverages Xiaomi smartphone imaging technology to perceive its surroundings, and its advanced AI is capable of countless tasks and personalized interactions. It is built upon open source algorithms and move on with an open source community for engineers to share their latest innovations. On the smart manufacturing side, we've also achieved a major breakthrough. In July 2021, we officially entered phase II in the Changping District of Beijing. Leveraging our phase one R&D capabilities, the new smart factory will have an annual production capacity of 10 million premium smartphones, and it's expected to begin production by the end of 2023. We are confident that our smart factories will leverage our efficiency gain for China manufacturing industry. As from July, we announced two separate share award grants to employees who share our mission and values and have made outstanding contributions to our business. On July 2nd, we awarded over 17 million shares to engineers, fresh graduates, and other core staff. On July 5th, we awarded over 119 million shares to 122 technology specialists, our core management, and the initial recipients of our new 10-year entrepreneur program. We believe these share awards will help us attract and retain the best talents and motivate them to create the long-term value for us. An update on our smart EV business. Since I think the best team for this important initiative. In the last couple of months, we have received over 20,000 applications for our smart EV business. In particular, we announced 500 new positions in July for our self-driving division. Today, as many of you may have noticed, we also announced that we will acquire a company called DeepMotion, one of the leading providers of L4 autonomous driving technology. We are very confident that we'll continue to attract the best talent to this very new and important business. With that overview, let's dive deeper into each of our segments, starting with smartphones. In the second quarter, our smartphone business continued to grow rapidly. Revenue grew 86.8% to CNY 59.1 billion, our highest ever. Our global smartphone shipments reached a new record high of 52.9 million units, up 86.8% year-over-year. In mainland China, we continued to expand our offline channels. As of the end of 2021, the total number of our retail stores in mainland China exceeded 7,600, an increase of 3,100 stores from March. Many of these new stores are set up in lower tier cities, which have allowed us to penetrate new markets and expand our market share. As you can see, our offline smartphone market share in mainland China increased to 7.8% our last quarter. While we continue to expand our offline presence, our online channel also set new records. During the 618 e-commerce festival, our cumulative paid GMV exceeded CNY 19 billion, an increase of 19% year-over-year. The order volume of our smartphone ranked number 1 among Android smartphones on JD.com, Tmall, and Suning. Furthermore, our AIoT products achieved a total of 158 number 1 rankings across various platforms by order value or by order volume. Turning now to our significant achievement in the overseas markets. According to Canalys, in the second quarter, we increased our smartphone market share in all key regions where we operate. In particular, our ranking in Europe climbed to the number one position for the first time. Furthermore, our market share rankings in Asia Pacific, the Middle East, and Africa rose to number one, number two, and number three respectively. Our smartphone market share ranked number one in 22 markets worldwide, and was among the top five in 65 markets. It's also worth noting that we ranked number one for the first time in 10 new markets this quarter. We ranked number one for the first time in Europe, with a market share of 28.5%, as our smartphone shipment increased 70.1% year-over-year. In Spain, we ranked number one for six consecutive quarters, as our market share reached 41.2%. In Italy and France, our ranking surged to the number one position with market shares of 35% and 29.7% respectively, as our shipment grew over 80% year-over-year in both countries. Let's move on to the AIoT business. Our AIoT and lifestyle product revenue increased by 35.9% year-over-year to CNY 20.7 billion in the second quarter. Our global leading consumer AIoT platform continues to expand. The number of connected AIoT devices on our AIoT platform reached 374.5 million, up 34% year-over-year. The number of users who have five or more devices on our AIoT platform reached 7.4 million, up 44.5% year-over-year. In June 2021, our AI assistant, MAUs, surpassed 100 million for the first time and reached 102 million, an increase of 30.2% year-over-year. As the number one TV brand in mainland China, we continue to launch new and innovative products, especially in the premium category. In August, we launched the premium Xiaomi TV Master 77-inch OLED, which featured for the first time the UWB technology. In the second quarter, our global shipment of smart TVs reached 2.5 million units. According to AVC, our TV shipment ranked number one in mainland China for the 10th consecutive quarter and among the top five globally. To further expand our multi-screen ecosystem, we launched the Xiaomi Pad 5 Series in August, our first tablet since 2018. The Xiaomi Pad 5 Pro features highly attractive hardware specifications, including the Qualcomm Snapdragon 870 processor, an 11-inch 2.5K display, 67 W fast charging, and customized keyboard and pen accessories. It is seamlessly integrated with our MIUI for Pad operating system, which offers optimized support for over 300 mainstream apps, further improving user experience. We also recently launched our first premium smart speaker, which we call Xiaomi Sound. The speaker offers high-resolution certified audio with dynamic tuning by Harman for an immersive and realistic sound experience. It also features the UWB technology, which enable them to connect with our smartphone seamlessly. Our AIoT and lifestyle product segment also continues rapid growth trajectory in the overseas markets. In the second quarter, overseas revenue from IoT increased by 93.8% year-over-year. Our smart TVs entered new overseas markets and are now sold in more than 40 markets globally. Many of these IoT products have gained popularity overseas. For example, overseas revenue from our electric scooters, our smart wristbands, smartwatches, and desktop monitors have grown over 100% year-over-year in the overseas market. Now let's move on to our internet services segments. Our global internet user base continued to grow rapidly and drive our internet services business. In June, our MIUI MAU increased by 32.1% year-over-year to 453.8 million. While our mainland China MAU rose to 124 million, increase of 5.3 million users from the end of March. Our global TDM AU also grew over 34% year-over-year. As our global user base continues to grow, revenue from our internet services segment reached CNY 7 billion in the second quarter, up 19.1% year-over-year. Our quarterly advertising revenue hit another historical high and reached CNY 4.5 billion, which also contributed to the increase in our gross margin in the internet services segment, to a record high of 74.1%. Our overseas internet services continue its strong growth momentum, and we see significant potential to further penetrate the overseas markets. In the second quarter, overseas internet service revenue increased 96.8% year-over-year, and accounted for 15.6% of our total internet services revenue. Our MIUI MAU in some of the key overseas regions continue to grow rapidly. For example, our Western Europe MAU grew more than 60% year-over-year. Our Latin America MAU grew over 125% year-over-year respectively. Going forward, we'll further diversify our overseas internet services offering and enhance our user experience. Let's move on to more detailed financials. As mentioned earlier, our total revenue reached CNY 87.8 billion in the second quarter, up 64% year-over-year, and 14.2% quarter-over-quarter. All of our three key segments demonstrated strong growth on a year-over-year and on a quarter-over-quarter basis. Revenue from our smartphone grew to CNY 59.1 billion. Revenue from our AIoT and lifestyle product reached CNY 20.7 billion. Revenue from our internet services segment reached CNY 7 billion. Overseas revenue increased 81.6% year-over-year to CNY 43.6 billion, accounting for 49.7% of our total revenue. Talking about our gross margin. Our gross margin reached 17.3% in the second quarter. Our gross margin for our smartphone, IoT and internet services segment was 11.8%, 13.2%, and 17.1% respectively. Gross margin from our smartphone and AIoT segment decreased on a sequential basis, mainly due to enhanced promotional efforts during the online shopping festival in the second quarter of 2021. Our quarterly adjusted net profit again reached a new record high of CNY 6.3 billion, up 87.4% year-over-year and 4.2% quarter-over-quarter. Our adjusted net profit climbed to 7.2% in the second quarter from 6.3%. Due to our high operating efficiency, our operating expense ratio in the second quarter remained stable at 11.1%. We continue to generate strong operating cash flow. In the second quarter, our adjusted operating cash flow reached CNY 8.1 billion, while our capital expenditure were around CNY 700 million. Our strong cash flow allow us to optimize our capital structure. We have returned some of the cash back to our shareholders in the form of stock repurchase. In 2021 year- to- date, we repurchased a total of 208 million shares, around HKD 5.4 billion. Primarily due to our strong operating cash flow and our capital market financing activities, our total cash resources reached over CNY 111 billion as of the end of the second quarter. We continuously explore suitable investment opportunities across different industry verticals. Our investments enable us to create long-term strategic value while generating additional earnings growth for us. During this quarter, we generated an after-tax net gain of CNY 1.1 billion from disposal of some of our portfolio investments. As of the end of the second quarter, we have invested in more than 330 companies, and the total value of our investment reached CNY 74.5 billion, representing around HKD 3.57 per share. Last but not least, as the world's second-largest smartphone company, we are fully committed to leveraging our scale and efficiency and drive a more sustainable economy that supports our users, our employees, our company, and our planet. I'd like to take this opportunity to give an update on our ESG strategy. We firmly believe in leading by example and are proud to integrate ESG factors into our product and service structure and in our overall brand. Xiaomi joined the United Nations Global Compact in 2020 and supports the sustainable development goals adopted by the United Nations. We benchmark ourselves against international best practices and have implemented ESG strategies in relations to our green operations, our circular economy, workplace diversity, employee development, public welfare, data protection, and more. To boost our employees' sustainability awareness, we actively promote our ESG framework to all of our stakeholders, including upstream and downstream business partners. We have set up a Corporate Governance Committee which coordinate ESG and green finance-related matters, prioritizing our sustainability targets according to the unique characteristics of our business and our industry. In July 2021, we published our 2020 sustainability report and the green finance framework, which are all available on our website. We also issued our inaugural 30-year green bond, which was the first green bond issuance by any Asia TMT company. As an important component of our ESG strategy, we have very strict privacy protection and data security. In June 2021, we held a Security and Privacy Awareness Month to raise our employees' awareness in data security and privacy protection. This company-wide event lasted for 30 days and had over 12,000 offline staff visits. In the second quarter, we also released a set of security and privacy white papers for smartphones, for our MIUI system, and for our AIoT products, along with our 2020 transparency report, which is published for the first time. In the future, we'll continue to hold ourselves to the highest standards with regards to cybersecurity compliance and user privacy protection. This concludes our prepared remarks. We would now like to open the call for questions from investors. Thank you, Alain. 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. Operator? Thank you. The question and answer session is now open. To register your questions, please press star one on your telephone keypad, and if you wish to cancel the questions, you can press star two. Our first question is come from Kyna Wong with Credit Suisse. Please go ahead. Thank you. Congratulations for such strong results. I have two questions. The first question is about the internet business. We would like to know about the outlook for the second half internet business as advertising business continues to benefit from MAU or ARPU increase and also smartphone shipment increase, et cetera. Can we expect normalized effect from gaming business terms and also FinTech with control in the second half so that the outlook for the second half internet business will be very encouraging? What do you think about the positive impact as the number one brand in Europe smartphone market and also 22% market share in the Western Europe and into your internet business? This is the first part. Thanks. Thanks, Kyna. The internet business, our advertising business obviously benefiting from a couple of trends. Number one, our increased install base. Number two, our premium smartphone market penetration. If you look at our install base, as you can see, our MAU reached 124 million at the end of last quarter. As well as our premium smartphone shipped over 12 million units in the first half of this year. We'll continue to benefit from the increased install base as well as the increased percentage in our premium smartphone. Obviously, there will be some challenges because there's a lot of regulatory restrictions in the Mainland China market, right? Which impacts some key sectors that invest a lot in advertising. Also with the new data privacy laws, and obviously, we're still assessing the impact that it has on our business. Overall, we are very positive we'll continue to grow. On the gaming side, we've seen improvement in our gaming business. As we look at our third quarter results so far, we've seen a pickup in terms of growth in terms of our gaming business. We also benefited from some of our products. For example, we launched the K40 Gaming series in the second quarter, we've seen pretty significant gain in revenue on those products versus a more general smartphone. We continue to be very hopeful that second half of the year, we'll see improved growth in the gaming sector. On the FinTech side, we've seen continued improvement in our gross margin in our FinTech business. As we move from a more balance sheet heavy model, to a more balance sheet light model, we've seen improvement, and obviously the improvement in the credit market in China obviously benefits in that initiative as well. We've seen very healthy margin for our FinTech business in the first half, and we'll continue to see healthy margin in the second half. In terms of the overseas internet, I think as we show in the chart, the overseas internet market has showed a very strong growth in the first half, and represented a very strong percentage of our overall internet business. We are still not quite monetizing the users at this point. I think at this point, it's all about market share at this point. We'll continue to watch the monetization opportunity, especially in the Western European market. We want to make sure that the user experience are good before we start to monetize our users over there. I hope that answers your question. Yes. Thank you. I have another question more about the outlook for the second half smartphone shipment, because we consider the chip tightness continue demand because in China, at least so far, I mean, still like down, I don't know, digit. The way Xiaomi competition was on there, what should we expect? I mean, because we see the company has already set the target as the number 1 smartphone brand in 3 years. What should we expect going forward and the strategy to boost the, I mean, the market share and also the presence in China as well? Yeah. Let me take your second question. This is regarding the second half forecast. Actually, we continue to see the business opportunity, the growth opportunity for smartphone shipment globally. Real challenge for everybody actually, not only for us, is the supply shortage. We are working very hard to get more supply to support the different requirement from different regions and markets. Also, I think, we have to manage the growth in more than, I think, over about 100 different markets. We need to be working very hard for the supply. That's one potential challenge for us. Also in China market specifically, we need strategy, so that we can have more coverage. Right now we have over 7,000 retail stores in Mainland China. We'll continue to grow that number. That's a long-term thing. Once we build the store, we need to train the sales and help the store grow the business. That also takes time for a new store to become a real profitable or high growth, high output stores. This is another challenge. I think we are confident that if we continue to execute the strategy to grow the number of stores and also to help the store to grow with the software, the tools. We are confident that we will continue to grow our business in China as well. The overall, let me summarize. Number one is we need to deal with the shortage issue. Secondly, we need to continue to execute our strategy for the offline, especially in China. In overseas market, I think, we have over 100 different markets. We need to maximize our usage of the supply. I hope this answer your question. Thank you. Thank you. Thank you. Our next question comes from Leping Huang with Huatai Securities. Please go ahead. Okay. Thank you for taking my question. My first question is also related to smartphone. I think Lei mentioned that Xiaomi wants to become a global number one smartphone company by volume in three years. If I understand correctly, the current number one player, Samsung, is roughly 300 million units per year shipment, and you are roughly 200 million units. In order to achieve this global number one, where do you think you can get most of the additional volume in the next few years? On which markets and which segments is it? Yeah. I think we still see a lot of new opportunities for us. Although we are number one in Europe for the first time, we'll continue to see a lot of space to grow, even in Europe. Outside of Europe, actually, if you look at the growth rate, you can see we have a very big potential in Latin America, Africa as well. We'll continue to supply the right product for those regions. That's for the market opportunity side. In order to be number one, I think we also need to continue to invest into more R&D resources. Now this year, our R&D investment is going to be CNY 13 billion. The second quarter, actually, we have a very high growth R&D investment. In the second quarter, I think we'll continue to invest in the third quarter or the fourth quarter so that we can make sure we invest enough on the R&D side. We'll continue with the R&D resource to continue to innovate in many different technology areas. Actually, Alain just mentioned in the MIX 4, actually, we brought new technologies. We got the camera under panel. Also UWB. We'll continue to bring more and more new technologies into the smartphones and also the ecosystem products. I think in the long- term, I think we are confident that we see the opportunities, and we are confident that within three years we can achieve the goal set by our Chairman and CEO, to be number one globally. Great. It's very great. Efficient timing. The second question is about your Smart EV business. We see a lot of news recently about your Smart EV business, including today's announcement of the DeepMotion. Do you have a more clear plan to share with investors about what will be the scale of the staff and what's the relation between your EV business from the R&D structure with your smartphone business? What's DeepMotion's role, the company you acquired today, in this EV plan? Thank you. Yeah. Why don't I take that, Leping. Respective to DeepMotion, we did file an announcement today. A lot of the information are included in that announcement. Just to summarize, the total considerations that we are going to pay for the acquisition is going to be $77.4 million, right? A lot of this will be in terms of stock. A lot of these payments will be deferred until certain milestones are hit. Therefore, we want to make sure that we are retaining and motivating this team. That's the first point. Second point is, we do believe that the company is very attractive to us, right? Let me find the information. The company is an autonomous driving technology company. It's focusing on providing the full stack software solutions for the ADAS and on automated driving applications. We believe that there's a lot of synergies with the technology, with our EV initiatives. I think it tells you a couple of points. Number one is grow our EV business. As I said in our prepared remarks, we've been very focused on hiring the right team for the EV business at this point in time, formulated our product strategy, et cetera. At the same time, we are not afraid to acquire and integrate other teams if we find that those will help us accelerate our plan, right? I think this will prove to you that we are very focusing on attracting and retaining these experts and talent. We are making very good progress in that regard. Picture of the EV business you can share with us today? Formulating the team. We think that we are ahead of our schedule. We are making very good progress. If there are more details you can share with- I think what we can share is right now we are focusing on three things. Number one, as Alain just mentioned, we hire the talent. We try to find the best talent we can find. We need a world-class team to execute. This is very important. Secondly, we are doing a lot of development. Right now, as Alain mentioned, we are on track, we are confident that we can achieve what we will as planned. Thank you very much. Thank you. Thank you. Our next question is coming from Gokul Hariharan with JP Morgan. Please go ahead. Yeah, hi. Thanks for taking my question, Gokul from JPMorgan. First of all, can I ask a little bit more on the supply limitations and the chip shortage? I think even today we saw some headlines about Xiaomi having to pull some models in certain markets because of chip shortage. Could you help us understand what is the extent? Is it limiting your shipments by 20% when we look into the second half of the year? What is your estimate at this point in time in terms of where we will see this issue get resolved? Is it sometime end of this year or is it going to persist into next year as well? That's my first question. Good question. The challenge for us, not only for us, actually, this is a challenge for the whole consumer electronics industry and even for the EV industry. This is a global shortage. The challenge for us is right now we are in markets, right? Actually, demand is very strong and the requirement is very different. The challenge is to manage the dynamic. At this moment, I cannot share the quantified impact. Overall, I think it's on track. We are working very hard, trying to get more supply and then try to allocate the supply we have got, allocate them to the right markets. That's the challenge we are dealing with. Yeah, this is what I can answer. Gokul, I think one clarification is I'm not sure where this cutting orders is coming from. Yeah. I think we're still on track. Got it. Understood. Second question on the internet services. I think some of the more broad-based companies in China have warned about a little bit of slowdown in advertising given some of the regulatory pressures and some other industries which are heavy advertisers starting to see some regulatory impact. I think you guys have been growing very rapidly, especially in Q2, for advertising. How do you think about advertising revenues, in particular in the second half of the year, and the tailwinds and the headwinds that you're seeing there, especially as you are also increasing the ARPU of your own smartphones in China? Maybe second part of that is, the mix seems to be very heavy advertising at this point in time. Is that something that we should continue to expect over the next maybe two to three quarters, or do we see a more balanced mix of other value-added services and gaming also kind of coming through? Yeah, Gokul, as I said before, I think it is more a balance between having a bigger, larger user base, shipping more products year- over- year in each quarter, and then getting more product shipped in the premium segments, right? Obviously, I think all those factors will lead to a higher advertising revenue, right? Balanced by some of the difficulty faced in some of the sectors or the lesser spending in some of the sectors due to regulatory pressures, right? I think that's a balance between those two factors. Overall, I think we still expect to see continued growth in our advertising revenue due to our larger install base. I think that's point number one. In terms of your second question, I think we've said this in the last few quarters as well, which is we obviously love to see a more balanced internet services gain as well as other businesses. We are hopeful that it will be the case. That's something that we are still working towards. I mean, obviously in the near- term with the higher smartphone growth, I think it will naturally lead to a higher advertising revenue base. Okay. Thank you very much. Thank you. Just a reminder, everyone, if you wish to ask a question, please press star one on your telephone keypad. Our next question comes from Yingbo Xu with CITIC.Please go ahead. Thanks, Wang Xiang. The first one is about our competitors and new models. We have seen Xiaomi market share increase in the second quarter, and also the MIUI user, number of new MIUI user in mainland China keep increasing. However, we still see that the competitors like Honor brand has played very strong in the market. My first question is how we plan for the competition in next half of this year, especially our new models launch plan. I think we are focusing more on the product and the offline channels build up in China mainland market. As I mentioned earlier, we have over 7,000 stores, but we need more than 7,000 stores. We continue to build our offline coverage. It takes time for us to build more stores. I think that's one challenge. We are working very hard on that. Secondly, we are focusing on the right product. We want to offer the right product to the consumers. Also it takes time for us to not only grow the stores, to gain market share or to grow their smartphone shipment from every store. It takes time for a new store to become a mature store. Also it takes time for us to train the store managers and also the sales people working in the store. Also it takes a lot of time. We are confident in the long term with the right coverage and also the right product, I think we can compete. I think our focus is on our side. The competition, I think in China market, there's never a lack of competitors. We were born from a competition environment, so we will continue to focus on product and also offline channels. I think this is what we are doing now. In the global market, actually, we see so many new opportunities and growth areas. We'll continue to execute this strategy. Got it. Yeah. Thank you. My second question comes from the store source and the other data we noticed that is about the efficiency of the single stores. It seems that those stores opened before last year performed relatively good. When we calculate the performance of the newly opened stores, especially we consider all the stores as a total. I know that need time to improve, but how we see the improving in the second half for the sales efficiency of single stores? Thank you. Yeah. Thank you. Thank you for the question. Actually, I mentioned. One of the challenges is to train the new store to become a mature store, right? Including the training for the employee, the store managers, and also the sales guys working in the new store. Also takes time for the consumers to be familiar with the new store, right? I think that's number one. Number two, we will continue to, how to say, to upgrade the software, the tools we are offering to the stores so that we can use the data and use the tool to improve the efficiency of the operation. I think those are the two major areas we are working very hard. Yeah. Thank you very much, Wang Xiang. It's very helpful. Thank you. Thank you. Our next question is come from Taurus with Goldman Sachs. Please go ahead. Thank you for taking my question. If I look at your offline presence and the market share you talk about, could you just give us a feel for if you look at that market share and the number of stores you laid out, what is the number of stores you would need to roll out in the country to get to the number one position three years out from now? I suspect you would have to match the market leader in the offline space to be able to get to that number, that's the reason for the ask. The second question I have is centered around your gaming revenue, where you talked about a decrease due to the revised commercial terms. Is this a new revision? Is this a revision that we've seen at work for a couple of quarters already, and it should now stabilize as you can start to see that move forward? Thank you. Yeah. The first question is regarding to the offline coverage. Right now we have over 7,000 stores. I think we need much more than 7,000 stores. Right now, our offline market share based on the Q2 numbers are around 7.8%. I think you see that we have a great space to grow. In China market specifically, there are about probably around 70% of the smartphone shipped or sold, coming from the offline stores. Right now we only have 7% of the offline stores. You see the potential. Our competitors, they have much more stores than we have. We will continue to grow the number of stores, number one. Number two, we will figure out a way. I think we are in the right track to continue to improve the store efficiency, so that we can sell more smartphones from the offline stores. I think this is what we are doing now. Yeah. Right. Taurus, I think with respect to the offline network, I am not quite sure we need the same number of stores as number one guys to get to number one. I think our model has proven that it is working, and it is very efficient compared to our competitors, our peers. Therefore, we are hopeful that we do not need that many stores to achieve the same result. I think that answers your first question. To answer your second question, I think on the gaming revenues, I think that, yes, the commercial terms were the ones that we talked about last year. Therefore, as I mentioned earlier, we are beginning to see growth picking up again on the gaming sector as we are comparing apples to apples. I wonder if you could share with us the rate revenue share adjusted growth rates in gaming on a year-on-year basis for Q2. I realize it is hard. Thank you. We will now invite the last question. The question is come from Tianqing Huang with CICC. Please go ahead. Hi, management. Congratulations on the very strong results. I have got two quick questions. The first one is about our MIX smartphone position. We think the pricing of our new MIX model smartphone is higher than the previous ones. Should we share more details on the positioning of the MIX series? I wonder when we will see a result of our new brand. Thank you. This is my first question. Actually, we position MIX as the pioneer of the latest technology. If you remember that a couple of years ago when we launched our first MIX product, which was the world's first full display phone, even ahead of everyone. That phone actually was collected by several art museums in Europe, including Pompidou Museum and a museum from Germany and also Denmark. We'll continue that brand. I think early this year we'll launch a product, which is also very difficult and latest technology we were using in that phone. This time also we add what we call the CUP, the Camera Under Panel technology. It's also a difficult technology, which can be used in the smartphone, especially for the front camera. We bring UWB to that smartphone, to the MIX, and also they can improve the features not only on the smartphone but also the connectivity between smartphone and the AIoT products. That's the MIX. The Mi series. Mi series is traditional high-end product for Xiaomi. We always bring the best user experience to that series. For example, the previous launch, Mi 11 Ultra. Actually, in that phone, there was the world's number one quality camera in that phone. It's number one in the DXOMARK benchmark. We'll continue to maintain MIX series and the Mi series to bring different kind of user experience to the consumers. I think that can answer your question. Thank you. Thank you. My second question is about our China's offline channels. I think we've seen that we expand really fast in our domestic offline channels. I wonder will we keep this fast speed in next year, and how we control or, shall we say, plan the pace of our offline expansion. Thank you. I think we will continue to improve in the store efficiency, number one. Number two, improve the coverage. That means we need to build more stores to cover more territories in China domestic market. Also, continuously improve on the tools we are providing to those stores. Those are the three important things we will be working on even for the next year. Okay. Thank you. Very clear. This concludes the conference call today. Thanks again for joining us, and you may now disconnect.