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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to 2022 Fourth Quarter and Annual Results Announcement Conference Call. Today's conference is being recorded. If you have any objections, you may disconnect at this time. [Operator Instructions].
I'd like to hand the conference over to your host today, Ms. Anita Chan, Head of Investor Relations and Corporate Finance. Please go ahead, Ms. Chan.
Good evening, ladies and gentlemen. Welcome to the investor conference call hosted by Xiaomi Corporation regarding the company's 2022 fourth quarter and annual 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 near 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 we have Mr. Lu Weibing, Partner and President of Xiaomi Corporation; and President of the International Business Department and Mr. Alain Lam, Vice President and CFO of Xiaomi Corporation and Chairman of Air Star Digital Technology. To start, Mr. Lu will share recent strategic and business update of the company. Thereafter, Mr. Lam will review the business and financial performance for the third quarter of 2022. Following that, we will move on to the Q&A session.
Good evening, everyone, my name is Lei Jun. So very quickly, I like to walk you over our performance for 2022 Q4, and for the whole year, it will include the following content. The first is to look at the macro environment of 2022 and an overview of 2022 performance and a business. In addition, I will also be focusing on the few business sectors that you are interested in. In addition, we will also talk about our business upgrade and future outlook.
As we know 2022 is a year full of a challenge. All industries were impacted by macroeconomic headwinds, including rising global inflation, foreign exchange fluctuation, complex geopolitical environments and global COVID-19 resurgence, which severely weakened consumer demand, particularly the smartphone industry experienced a fast reversal in supply and demand, with chips inventory shifting from shortage to oversupply, resulting in excess inventory across the industry and intensified market competition.
As a result, global smartphone market declined by 12% year-on-year in 2022 to below 1.2 billion units, a record low in the past nine years. Similarly, Mainland China's smartphone market dropped by 14% year-on-year in 2022 to below 300 million units, as record low in the last decade. Nevertheless, each of our businesses segments remained resilient.
In 2022, our total revenue amounted to RMB280 billion, and our adjusted net profit was RMB8.5 billion, which included RMB3.1 billion in expenses related to our smart EV and other new initiatives.
Looking beyond our financial performances, I'd like to share with you the fundamental changes and the progress we have made which may well be your top concerns. Firstly, we have made notable progress with our premiumization strategy after three years of explorations are fraught with many setbacks, we stepped up from the lessons learned and created our own methodology.
In 2022, our premiumization strategy has moved from theory to practice. We upgraded our product to concept with a priority from smartphone specifications to user experience, and focused on deepening hardware and software integration, aiming for providing premium smartphones with the best of technology and user experience. Meanwhile, we also updated our mobile imaging strategies through strategic cooperation with the light hub, embedding our products with the imaging technology that would truly achieve a letting the heart see what is invisible to the eye.
These strategic upgrades and initiatives that begin to bear fruits since the second half of 2022, we launched three consecutive premium products including Xiaomi 12S Ultra in July, Xiaomi MIX FOLD 2 in August and Xiaomi 13 Series in December. Each generated a strong our premium users as evidenced by above 98%, a positive review rate on jd.com.
And one month after product launch in 2022. Our brand loyalty exceeded 50%, ranking number one among Android smartphone brands. Thanks to our enhanced product capabilities, our market position has also improved. Notably in the fourth quarter of 2022, our smartphone shipments in the region of RMB3,000 to RMB4,000 price segment ranked number one in Mainland China. According to the latest data in January 2023, our smartphone shipments in the RMB4,000 to RMB5,000 price segments also ranked number one among Android smartphones in Mainland China with a market share of 27%.
We believe that it is more vital than ever to invest in our long term capabilities, especially in times of challenges. In 2022, our R&D expenses reached RMB16 billion, increasing at a compound annual growth rate CAGR of 38% from 2017 to 2022. Our R&D expenses are expected to exceed RMB20 billion in 2023, and expected to exceed RMB100 billion during 2022 to 2026.
As of December 31 2022 our R&D personnel is accounted for nearly 50% of our total employees. Meanwhile, we have obtained more than 30,000 new granted patents worldwide covering more than 60 countries and regions. Our latest self-developed pioneering products and technologies that include Xiaomi Wireless and AR Glass Discovery additions and solid state battery technologies, et cetera.
Thirdly, I like to share with you in terms of our steady progress in the globalization strategy. Against the backdrop of extreme uncertainties in 2022, our global smartphone shipments maintained is the number three ranking with a market share of 13%. Thanks to our solid global business establishments and fundamental capabilities. It is noteworthy that we remained among the top three in Europe in 2022 with a market share of 21%. Particularly we maintain our number one position in Spain with a market share of 33% in 2022 was ranking number two in Italy and number three in both France and Germany.
Dominated by carriers, the entry barrier in Europe is considerably high, with the top three players forming a virtually impregnable fortress and we managed to enter the European market by establishing in-depth partnership with leading carriers and this has laid a solid foundation for our business going forward. We expanded into the global market since 2014, with overseas market contributing 75% of our total smartphone shipments in 2022.
Going forward, we will continue to fortify our fundamental capabilities in overseas markets, focusing on prudent operations and strengthen the localization strategy in key overseas markets. And meanwhile, we will continue to advance our brand premiumization strategy in key overseas markets to build a secure and efficient global operating platform. As such, we will bring our amazing products to let everyone in the world enjoy a better life through innovative technology.
Firstly, I like to share with you on some of the updates regarding our new retail strategy in Mainland China. Despite the offline foot traffic and sales was deeply impacted by COVID-19 resurgences is through our 2022, the GMV of our offline channels continue to grow. And the average single store GMV per month, we can see that it is actually improving and we can see in January and February in 2023, the GMV increased by over 30% compared to the fourth quarter of 2022. This is a quite an achievement.
In 2022, I have laid a solid foundation and resisted the challenges and difficulties that we've faced, notably over 50% of Xiaomi’s 13 Series sold via offline retail stores by end of February 2023. So you can see that the more expensive the products are, and the more contribution they would make. So for 2022 what we have done is that we have taken a series of measures to improve efficiencies. We strengthen our approach to attract and cultivate talent and training new staff to become experienced store managers and masters of the different categories to improve our professionalism. So we have done this work very well in 2022.
Secondly, we worked closely with our three major carriers in Mainland China, generating significant profit through Mi Home and our business partners. They have contributed to our partner business greatly.
And lastly, is the integration of our online and offline business contributing to over 20% of Mi Homes online orders the end of Q4 of 2022. This is my briefing on our four areas of work in the above sectors. In the meantime, so we have also done some upgrading for management since our IPO in 2018, we have grown from an early entrepreneurial team to a young highly motivated professional team of leaders.
And our whole team of talent that have been completed and therefore navigating the market headwinds in 2022, we have done a series of internal reflections on our business in early 2023. We set up two key committees on group governance. One is our group business operation committee responsible for overall management of businesses strategy planning, budget execution, daily business management. The other is our Group Human Resources Committee and they will facilitate a more professional practices over human resources strategy and strengthen the synergies between human resources and our business divisions.
This is a giant step forward in our professional group governance, it will significantly help improve the quality and efficiency of corresponding governance decisions. So whilst they're facilitating the rapid response and command for business as well as the long-term construction of the system.
Looking ahead to 2023 as the macroeconomic environment and the consumer electronics, the market are showing signs of recovery, along with the continued risk and challenges, it will take time for a full market recovery to materialize. Given the current environment for the first time, we are undertaking a key corporate strategy with a dual emphasis on scale and profitability. We will focus on elevating internal operating efficiency was to improving profitability with a detailed measures.
Meanwhile, we will capture the positive trends in 2023, including potential exchange rate stabilization and largely normalize the inventory level, to reinforce that risk management and maintain prudent operation. We are cautiously optimistic about the market in 2023. We remain confident in the company and our long-term strategy. 2022 witness a comprehensive transformation of our fundamental capabilities, but it will take time to translate business strategy to sustainable performance.
I genuinely hope that our investors, business partners and friends could maintain patience and confidence with us, as the fruits of long-term thinking will reveal themselves when we keep doing the right thing. And to the rest of time will tell.
Thank you very much. This is my brief introduction. And just to follow on Mr. Lu, and I would also like to thank all our investors and analysts for participating in our Q4 as well as our annual results announcement through telephone call.
As Mr. Lu has mentioned the 2022 was a year full of challenges. Global economy and industry development was impacted by a variety of factors that despite that, each of our businesses segments remained solid. In 2022, our smartphone revenue was RMB167.2 billion, accounting for 60% of total revenue.
Global smartphone shipments declined by 12% year-on-year in 2022, to a record low since 2014. However, leveraging our global scale and the diversified footprint, the fundamental of our smartphone business remained steady. Notably, our global smartphone shipment was 150 million units in 2022. And we have maintained a number three position globally for second consecutive years.
We ranked among the top three in 54 countries and regions and among the top five in 69 countries and regions globally. We also lead the market as the top three players in key markets including Europe, Latin America, Southeast Asia and the Middle East. As Mr. Lu mentioned earlier, our premiumization strategy made remarkable progress in 2022. Our global smartphone ASP hit a record high of RMB1,111.
In Mainland China, although the premium smartphone market priced above RMB3,000, dropped by 13% year on year in the fourth quarter of 2022, our premium smartphones sold increased by 35% year-on-year.
In 2022, revenue from our IoT and lifestyle products that was RMB79.8 billion, accounting for 28% of total revenue. As of December 31 2022, the number of connected IoT devices on our AIoT platform reached of 590 million up 36% year-on-year. In 2022, some of our key IoT product categories outperformed the market.
During the year, our Global Smart TV shipments reached 12.4 million units up 0.6% year-on-year, ranking among the top five globally, we achieved breakthroughs in both the quantity and the quality of our smart large home appliances including air conditioners, refrigerators and washing machines, and is the revenue in 2022 rows over 40% year-on-year.
In addition, our tablets gained tremendous popularity in the market in 2022. Our tablet shipments in Mainland China increased by more than 160% year-on-year ranking top three. In 2022, our internet services remained resilient with the full year revenue of RMB28.3 billion accounting for 10% of our total revenue and achieving year-on-year growth against the macro backdrop. Our global and Mainland China MIUI MAU both they reached another record high.
In December 2022, our global MIUI MAU reached 582 million whilst our MIUI MAU in Mainland China reached a144 million in 2022. We added 73.3 million global MIUI MAU, including 13.8 million in Mainland China. In 2022, despite the challenges have prevailed in advertising and gaming markets and our advertising and gaming businesses achieved a steady growth.
Notably our gaming revenue achieved a year-on-year growth for six consecutive quarters and continue the solid growth trajectory. It is noteworthy that our overseas internet services that have also achieved a robust growth with the full year revenue of RMB6.8 billion up 35% year-on-year. In the fourth quarter of 2022, our overseas internet business revenue accounted for 26.1% of our total internet services revenue, setting a new record.
In addition, our years of continuous effort in TV Internet services was starting to bear fruit in December 2022. Our Global TV MAU exceeded 58 million, including our TV paid subscribers over 6 million in 2022. Our TV value added service revenue also increased by over 25% year-on-year.
Very quickly to look at our gross margin. In 2022, our overall gross profit margin was 17%, which is above our previous a five-year average of 15.2%. Looking at it from different business sectors, our smartphone gross margin was 9% in 2022, primarily due to our enhanced promotional efforts and channel inventory clearance from the second quarter of 2022 as well as negative impact from U.S. dollar appreciation and the increase the inventory impairment provision.
However, our smartphone gross margin in 2022 still outperformed our previous five-year average of 8.6% and maintained a healthy level.
Last November, we adjusted the after sales service policy for a certain series of our smartphones, resulting in one-time charge of approximately RMB700 million. Excluding there's a one-time impact, our smartphone gross profit margin would be around 9.4% in 2022, and our total gross margin would be around 17.2%. Our IoT and lifestyle products gross margin reached a new annual high at 14.4% in 2022. Up 1.4 percentage points year-on-year, mainly due to the improvement in gross profit margin of smart TVs. Thanks to the decrease the price of a key component as well as that of a smart large home appliances. In 2022, our internet services gross profit margin was 71.8%.
Looking at our total operating expenses in 2022. This was RMB42.5 billion, up 9.2% year-on-year, accounting for 15.2% of total revenue. And this is mainly due to our continuous investment in R&D. In 2022, our R&D expenses reached RMB16 billion, up by 21.7% year-on-year. This is mainly because of our R&D expenses increase related to smart EV and other new initiatives. By end of last year, our R&D personnel accounted for nearly 50% of our total employees. Our selling and marketing expenses were RMB21.3 billion in 2022, up slightly by 1.6% year-on-year. Thanks to our tight control over marketing expenses was our investment in brand building.
We continue to control operating expenses, which began to bear fruit in the fourth quarter of 2022. Excluding the expenses related to our smart EV and other new initiatives, our total operating expenses declined year-on-year. Overall speaking, our adjusted net profit was RMB8.5 billion.
In terms of the expenses related to smart EV and other new initiatives was at RMB3.1 billion. In Q4 of 2022 our adjusted net profit was RMB1.5 billion. Mr. Lu also mentioned that in terms of our smart EV and other new initiatives that was RMB1.2 billion and because of the one-time charge of the approximately RMB700 million resulting from an adjustment of the after sales and service policy for a certain series of our smartphones to improve the customer's after sales experience in November 2022. We continue to maintain our strong cash position and in the fourth quarter of 2022 our total inventory was RMB50.4 billion decreased by 3.7% year-on-year and 4.8% Q-on-Q. Our self-owned and the channel inventories are both declined steadily.
As our inventory clearance went smoothly in Mainland China, India overseas market. Our inventory has reduced to a manageable level currently. In addition, we have -- in order to create long term value for our investors and shareholders in 2022, we have repurchased a cumulative of 235 million shares in 2022, totaling Hong Kong dollars 2.8 billion, we consistently advanced our ESG efforts as a participant of the UN Global Compact. We support the sustainable development goals established by the UN, we attach great importance to integrating the sustainability objectives into our practices that align with our business and the industry.
Most recently, we collaborated with external Carbon Data Verifications and a Certification organization to conduct our first lifecycle assessment a carbon footprint analysis in February 2023, the lifecycle carbon footprint of our latest premium smartphone Xiaomi 13 Pro overseas version is a 62.8 of kilograms of carbon dioxide equivalent.
Our implementation of our Carbon Footprint Management system marked a critical step towards our sustainability objectives, and underscores our commitment to developing ecofriendly products that benefit both consumers and the planet. Looking ahead to 2023 as Mr. Lu just mentioned, for the first time, we are undertaking a key corporate strategy with a dual emphasis on scale and profitability, we will optimize our internal management structures step up in expense to control and operating efficiency.
Meanwhile, against the backdrop of the complex, global macro and geopolitical environment, as well as the sluggish demand from the consumers, we will continue to prioritize and prudent operations that was to improving our risk management capabilities. And last but not least, more so than any other time in times of challenges, it is a vital to invest in our long term capabilities to lay the foundation for high quality sustainable growth.
We would like to thank all our investors analyst and our business partners for your long term trust and support for Xiaomi. That concludes our prepared remarks from myself and Mr. Lu. We're now ready for questions.
Thank you, Alain. [Operator Instructions] Our first question comes from Andy from Morgan Stanley. Please go ahead, Andy.
Thank you. I would like to thank Mr. Lu and Alain, for your remarks. And my question is in relation to smartphone business. We can see that in China right now we see a lot of different new products, including flagship phones. And will this actually put pressure on your domestic business? And just now we have heard from Alain and Mr. Lu, and your focus on this year would be on the smartphone?
And second in terms of investors -- in terms of overseas sales, and the visibility is actually quite low. So could we please ask our two leaders to tell us about the current inventory level for the overseas market?
Okay, thank you. The first question with respect to the new competitive products. So actually you can see that first, all the brands are quite aggressive. And secondly, in terms of their layout and their plans for launching their products, and they have also been very aggressive. And I think that in the short term, we might face some pressure. But looking at the long term, I don't really think that this will cause a long term issue. And looking at Xiaomi, looking at our 13 Series, so we believe that we are sitting very well, so we're not very worried about competition.
Your second question with respect to overseas market. For our overseas market in the recent two months, and we are not really yet seeing that the market has recovered. So for us, I think that it will take some time for the market to recover. And I think that in terms of the demand, it is not yet recovered. However, for Xiaomi, we think that our inventory has improved quite a lot.
Just now, Alain has also introduced and mentioned some specific figures. You can also see that the inventory clearance was our priority job last year. And it is currently at a manageable level or even in a virtuous cycle. So Alain, anything to add.
Well, Andy, actually if you look at our inventory, in terms of our Q4 inventory, it is already down to RMB50.4 billion. And -- so compared with the beginning of the year, and we were able to bring that down by 15%. And in terms of our costs to Q4, it has reached RMB28.4 billion and compared with the middle of the year, which was RMB31 billion. And this has also come down quite a bit.
Under the leadership of Mr. Lu, we have made improvements, but we continue to work and in Q1 and we continue to clear our inventory. However, what you can see is that right now, a lot of the inventory issues that could be resolved. And looking forward, we believe that the inventory level for this year could fall further.
Okay, thank you. That's very clear. Very clear. Thank you, Mr. Lu. And thank you, Alain.
Okay, great. Thank you. We invite the next question, Tina coming from Credit Suisse. Please go ahead, Tina.
Thank you management and team. And thank you, Mr. Lu and Alain. This is Tina from Credit Suisse. I have two questions to ask. The first one is that your company's strategy for this year, which is a dual engine growth and to reduce cost and improve efficiency. So I like to ask looking at it from a cost perspective for this year, we can see that a lot of upstream or supplychain in terms of parts, in terms of their price, et cetera. There is quite a lot of increase.
So for the company yourself in which areas for instance, where there's been quite a lot of decrease actually apologies, the end for this year. What areas do you see a big decrease of a price? Is it in camera or in memory, et cetera. And in the IoT system, we can also see that for the arm part, and perhaps they will adjust their fee charges, and in terms of the SOC percentage, and it is likely that it will become a divide.
And so if this is the case, and will this affect your cost reduction and efficiency improvement, so on one hand, you need to control the cost and your price, you would also need to make some adjustments or adjust the product structure. So for this year, we can also see that the premiumization strategy is something that's very important to you. So going forward for the company and in terms of the brand ASP, and how much will we see that improve? So this is my first question.
Okay, yes, indeed, one of our very important strategy is to reduce cost and improve efficiency. At the moment, we can see that there is still more supply than demand and in certain areas, for instance, a memory SOC, screen, camera, et cetera, at the moment, so we can see that there is some decrease going on and there at the moment, and I think that there is still quite a lot of room for us to further cut the cost of because the oversupply issue hasn't yet been resolved. And in addition, in terms of Xiaomi 13 series, and it has done quite well. And I think that the management will still have a lot to do with Xiaomi 13 series.
So there's quite a lot of potential for us to unleash. And in terms of arms and I have not yet to read the specific report. So I think that perhaps for this question, you know, just to answer in a very general way, based on my understanding, and for any of the fee charges, and this would really need to rely on a cycle. And we believe that this will be a long term cycle.
But I think that in the short term in terms of our costs, there won't be any impact. But if we're looking at it for the long term, I think that we need to delve into it further. It's very complicated. And we can't really resolve this here. And in terms of ASP, we believe that our ASP will continue to go up. And because you can see that we are focusing on premiumization. So we are very confident about the ASP improvements.
Alain, anything to add. And you can see that for our ASP for this year, we have reached a new record high Mr. Lu has said that our premium products percentage will continue to improve. In addition, Xiaomi 13 Pro, its sales that has also exceeded our expectations. So overall speaking for our high end products, and together with our collaboration with Leica, in Europe, this has attracted quite a lot of client. We hope that we would be able to launch more competitive products that are overseas and this will also help us to improve our ASP.
Okay, great. Thank you. My second question is to ask. In terms of your 2023 business. So in terms of your 2023 internet business and we can see that for an internet industry, perhaps soon we will see some recovery and on the platforms, there are also more push forwards and for the company, do you see that for instance. Companies are more willing to spend on their advertisement were on gaming and do you see any improvement of the gaming revenue? And are these the areas that you think that we will see better growth?
And in addition, for your value added services, and if we look at the company's profits, gross margin in the end this is a very important to support the company's gross margin. So what's your view?
Okay, let me answer this. If you are looking at 2022 and I think that again, the backdrop was difficult, but you can see that our IoT business is relatively stable. I think that this is because we have some increments in overseas and we continue to see more users overseas. And in the meantime, in the premium phone sector, the lifecycle of income versus and normal mobile phones, it is higher. So with the more of the premium products are taking up the percentage, and this will help with our IoT business.
And secondly, how do we look at the market. We're also looking at this recently and looking at some of our peers' announcement. And they are also in the beginning of cutting costs and improve efficiency and for the second half of this year, and they will weaken their relative cost cutting projects. And I think that in the short term, as I say, they will be focused on cost cutting.
So I think that going forward, we hope that there will be some improvement and certainly is on gaming. And on gaming, actually, you can see that the market is actually quite pro gaming these days. And you can see that there are signs of the gaming market opening up. And these are beneficial signs that we see and good for our business. And in addition, we can see that global network users has reached 1.5 billion people here. And we believe that if we can grasp this opportunity going forward, we will be able to grow further. Thank you very much.
Thank you. Our next question comes from Timothy from Goldman Sachs. Please go ahead.
Thank you, Mr. Lu and Alain, I have two questions to ask. The first one is that I remember in our last meeting, you had shared with us for 2023, China Mobile, smartphones sales outlook, and back then I think that you gave us the idea that it was going to be flat. And now with the pandemic measures that being lifted, do you have any updated outlook for the sales of mobile phones?
And secondly, on the gross profit margin for mobile phones for 2023? It is at what level and if we are going to break it down, for instance, coming from premiumization or cost cutting, or for instance some exchange rate contribution, et cetera. And can you please let us know, what are the different percentages of each of these different factors that is boosting your profit margin?
While looking at our figure at the moment, for January and February, it decreased by about 4% for the market as a whole and for March, it remained flat. So for the whole of Q1, and I think that is a year-on-year decrease. And from this perspective, we think that it is too early to say that the market has recovered. Will it recover the second half of the year, of course, we hope so? And this is our view of the market.
And in terms of this year for our gross margin, we think that our gross margin will improve. But it is a very difficult to say that how much comes from cost cutting, how much comes from premiumization. And I think that, because of these reasons, this will be a number of reasons a combination of all of those. And Timothy actually, if you look at mobile phones gross margin, last year was about 9%. So our five-year average was 8.6%. So we have improved the last year and 2021 was a very good year. But then again, that was because of the demand and supply in the market.
If you look at our gross margin, and in terms of U.S. dollars strengthening and the benefit it brought to our gross margin is about 1% to 2%. I didn't really calculate the specific figure. And in terms of inventories, the price dropping and the impact on this is a 1%. So if you do the calculation and I think that we could be above a 10% of the gross margin for mobile phones. So it's that's how we look at this, and if the exchange rate remains a stable or last year's fluctuation of the exchange rate, does not happen again. And if we actually converge that, and you can see that our gross margin would actually be above 10%.
Okay, thank you. Thank you, Mr. Lu.
Great, thank you. Our next question comes from [indiscernible] from CICC.
Thank you, Mr. Lu. And Alain, for taking my question. I have two small questions. First of all, Mr. Lu, just now you have shared with us on the new retail, and you have said that it is growing very fast. So could I please ask about your offline shop plans, for instance, for GMV, and the new shop plans, as well as some combination with our premiumization strategy?
And the second, I would like to ask about the new EV. And beginning of the year, Mr. Lei has also shared with us about some of the updates on the EV. So could I please ask in terms of EV business, is there anything to share?
Okay, thank you. So, first of all, in terms of the new retail, let me say a few words in 2021, we said that this was the year of fast expansion of opening shops. And the second year is to improve the efficiency and this year is to work on the integration. So the integration of the shops is key for this year, especially that this year. We'll continue to work with our partners and to ensure that they would be able to present a more of a professional service to our customers and to be better integrated.
And secondly, we will continue to follow our groundwork laid down in 2022 in terms of efficiency improvement, but we have not yet finished that work. And we think that this could be further solidified in 2023. Apart from this, we should also need to improve our non-mobile phone business, for instance, in the home appliance and last year's growth was very faster, especially in air conditioner that has a lot of improvement.
And actually, if you go and look around and for refrigerators, or smartphones, and people usually have one or two in their homes. And so we think that in the non-smartphone sector and in the Xiaomi home appliances sector, there is still quite a lot for us to do and of course I'm a firm believer in pre migration. And I think that so for one, only with the best of setting premiumization products that you would be able to bring the foot traffic and secondly, it will also boost our GMV greatly. So we believe that with all these measures, and for the Mi Home, and in 2023, we will be going up another step.
In terms of EV business. And today, in terms of our timeline, if we look at our schedule, and according to Mr. Lei, we are actually ahead of schedule. And we have already completed the necessary work and the tests. And in addition, so everything is on track. That's what I would say. Just now, Mr. Lu has mentioned in his remarks, he has already stated that with a lifting of the pandemic measures and in January and February, the GMV is 30% more than last year. And so you can see that this is the improvement comparing with last year, of course, it's not that fair.
But our GMV for this year versus last year for each quarter is higher than last year as each quarter. So I think that, again, this is a sign of a certain recovery, it's for sure it has recovered. And in addition in terms of premium product, which is Xiaomi 13. It accounts for over 55% of our offline shops and for IoT, it continues to take up more percentage of our business.
In addition, we also have the other businesses for instance, they carry us, would come into our shops, as well as the trading in business. And these are all happening at the same time. And I think that we are making good progress in terms of our outside shops. And in terms of EV business. I think that Mr. Lu has explained it very clearly and I will not repeat. Thank you.
Okay, thank you Mr. Lu and Mr. Alain.
Thank you. Our next question from [indiscernible]. Please go ahead.
Thank you, Mr. Lu and Alain, I have two questions. The first one is to ask about AI reason, the market focuses quite a lot on ChatGPT and its impact on the company. And -- for the company, you have also focused on AIoT business and in terms of the AIoT, and what is your technology capability? And will you be able to grasp the ChatGPT opportunity?
And secondly, in the past one month, we have seen a lot of volatility, including the collapse of Silicon Valley Bank, and you have a lot of business including investment business. So at the moment, what are your risk exposures of all these volatilities? And how do you cope with such volatility in the capital markets going forward?
Well, let me answer your ChatGPT question first. And yes, the ChatGPT is a very popular and we follow this closely. You know that for chat -- for Xiaomi, actually we have tried quite a lot in AI big models and for instance for AI assistant. And this is basically an actual application of a model of a prototype. And from that into actual practice. And I think that is a major challenge. But ChatGPT has enlightened us. And for instance, our AI team, we have a 1200 people on that team.
I assistant, we worked on this for six years, we have also accumulated a very rich users experience going forward, we will continue to work in this area, and to introduce more advanced capabilities and to carry out better functions. And for our AI assistant and for I assistant that basically with AI support, for instance, for our mobile phones, EVs, vehicles as well as our refrigerators, et cetera. And we at the moment have about 115 million people connected to our devices. And I believe that this is an area whereby we are very confident about I assistant and to the business, it can achieve it in the future.
Okay, great.
So, for your second question, which is -- with respect to the volatility in the international financial market. I think that's a very recently we can see that all these banks are affected, we do not have any deposits with them. So this is number one. The banks that we work with majority of them are Tier 1 banks. And we monitor the market situation every day and to ensure that our money will not be put at risk. So, this is a foundation and basic work of our responsibility of managing the funds.
And secondly, we are also trying our best to bring back all the capital to our headquarter and to manage this. And this is part of our homework. Going forward in the future, we are also monitoring the market closely. Of course, the market is changing rapidly. But in terms of what we are doing, we continue to maintain a very robust and stable management of our capital. We have not yet -- we have not invested in any derivative tools, et cetera. So relatively speaking, I would say that we are very robust. Thank you.
Thank you. Our next question comes from [indiscernible] from Citic. Please go ahead.
Thank you, Mr. Lu and Alain. I have two small questions. And the first one is that, on the investor day, in beginning of the year, Mr. Lu, you have also shared with us in terms of the overseas offline channels. And I like to ask when you are building more of these localized, basically service provisions and what is your expectation of effects that you wish to achieve with these localized shops and this would obviously come with a large cost and so I don't know how you would value such cost efficiency?
Second question is that last year, we have some streamlining of the staff we ended this is something that's quite common in the internet industry. And at that time, I think that there will be some expenses related to that and looking at this year, do you think that in terms of our sales, and in terms of expense ratio, and will we see a better decrease of your expense ratios, et cetera?
Okay, first, in terms of our overseas expansion, let me share with you. After Chinese New Year, I went to six countries in three major regions with my team and to look at our different markets, you know, right after the pandemic, and it was for the first time for us to be able to be on the ground and to have communications, whatever message that we had before the pandemic, during the pandemic, it was not enough, and definitely not as good as face to face communication.
So, on one hand, we can see that the last year, all brands have suffered and faced a lot of challenges and one of the brands, in certain countries, they have already exited the market, but Xiaomi will continue to adhere and insist on staying in all these markets globally. And I think that for Xiaomi’s business, especially when the market recovers, and I think that this will be a major boost. And that will be reflected very quickly.
And then secondly, the global market, of course, is a very large, it's very fragmented and diversified. So with all of this in the past, perhaps if we look at the market, and generally speaking, we will be looking at whether the market is big enough, or what are the structures of the consumers and these two years actually, because of the geopolitical reasons, we will also be adding the geopolitical risks.
And when we select markets, we will be selecting markets that have low risks and with a large population base and with a strong consumption capability. So those are the markets that we would focus on. And based on this, we looked at the 20 countries end markets and in those countries end markets, we will be investing heavily into those.
And we believe that such investment will definitely generate a good return to us whether it is from a strategies perspective for our mobile phones, or whether it is for our AIoT strategies. And I think on both fronts, we will benefit to -- benefit from this. And I believe that after many rounds of identification, and in terms of our basic strategies pushing forward, I do believe that we have done quite well.
And I myself, I'm a firm believer in this. And I think that Xiaomi going forward, we would be able to achieve a safe and highly efficient business. And we will always be able to produce and provide our products and to our global consumers in a highly efficient manner. So this is our long term goal. And the second in terms of staff streamlining, I'll have Mr. Alain Lam to answer this question.
I think that Mr. Lu's answer reflected a very good point, going forward, we will continue to have refined business. In addition, for instance, we have established two important committees and these two committees. In terms of going forward for our refined business, they play a very important role. And this is why we need to look at these countries one by one. This is because while we make investment, of course, we make investment in countries whereby we believe that we could generate a return. So this is part of our local geographic operation.
And your second question is about lowering costs and improving efficiency. You can see from our financial statement, there is some decrease of staff. But in the meantime, we're also investing in some other areas that we believe will give us a better return. So for instance, EVs and our other overseas markets, so we have an in and out to basically, but personally speaking, I think that streamlining of the staff is only part of the job. And looking at our refined operation. The key is really how to improve our investment, how to make sure that our R&D expenses can be improved in terms of the result.
So it is not simply just about the human streamlining, it is also about where the strategies are and whether they are following our directions. And so what I'm trying to say is that I'm not simply focusing on every sense that I spend on a special -- on the certain person, but rather on the whole picture.
Thank you. In the interest of time, and we invite the last question. The question coming from Oriental Securities.
Thank you, Mr. Lu and Alain. So I have two questions. The first one perhaps, is quite similar to a question before. And we can see that in Q4 in terms of your sales and marketing expenses accounted for 34%. And this is actually the highest figure for all these past few years. And perhaps this is also related to the complicated geopolitical regions. And we have also heard that Mr. Lu saying that you need to make a lot of efforts to ensure your advantage overseas?
And so considering all these going forward in terms of the sales in China, as well as overseas for sales and marketing expense, what's the relationship?
What's your other question? Would you like to finish your question? Perhaps?
Okay, sure. So my second question is that, we can see that for your larger home appliances business, in 2022, you have achieved good results. And do you have any experiences to share with us in terms of your successful experience? And how could those benefit your other business?
Okay, thank you. You had talked about Q4, and accounting for 53%. And I think that in a short term of one quarter, and this is related to our strategy, and for instance, for Xiaomi 13, and then there was a more marketing expense, because we had brought that forward by a month, et cetera. But I think that in terms of long term, and we still believe that the overseas market still has a lot of room for one, overseas market, the development was later than China. We started only in 2014.
In the last three years, in terms of the overseas market, the management, there were a lot of difficulties. So overall speaking for overseas market, we feel that there is still a lot of rooms for us to develop and a lot of potential for us to discover, because the market size is there, and is always bigger than Mainland. And for our AIoT percentage in overseas is a way lower than the Chinese market.
So for the overseas market, I still believe that there is immense potential, and for this year, and I have also arranged quite a few business trips for myself and to try and to go to all these different overseas markets, to take a look at that we are fully confident about the overseas market, whether it's AIoT product, or our premium products, or any other areas, there is still a huge gap between the overseas market versus the China market. So through our hard work, we would be able to discover and unleash such potential.
Second in terms of our large home appliances business, especially for air conditioning. And I remember that air conditioning grew by 50%. And refrigerator was 100%. So actually, for today, in this market, we are not yet a fully-fledged player. And I think that we are number five for air conditioning, refrigerator number six, there are still many number one, number two in the respective areas. So we are still way behind them.
And I think that for large home appliances, we were able to grow so much last year, as because first of all, we have been in these industries and sectors for a few years. And for a new business. Generally speaking, it would take us about the three to four years to complete the business. And that is a learning curve that we need to get over it. So roughly speaking, three to four years. That's enough and after the learning curve, we would know that so where we should be investing.
And I think that last year, first of all is our investment for instance, we had invested in a lot of resources and we were able to look at and a grasp of these opportunities. For instance, air conditioning and we were able to grasp the electronic system. And for instance, how does the air flow in the air conditioner and to make sure that the air conditioning can run efficiently.
For refrigerators and washing machines, we are also working very hard towards making sure that we can grasp these key points. And secondly, is that compared with our competitors and our partners, in terms of our manufacturing capability, we are improving it. In addition, this will help us to reduce cost and certainly for Mi Home. And I think that Mi Home has certainly helped us to realize our advantage.
And you can see that if you go some people's home and you can see that for air conditioning, we will have two air conditioners on the wall, they have one air conditioning standing in the room and for a refrigerator its the same. And I think that people were really need to try it out and see how they think about it. And I believe that the foundation that we have laid out last year, for the next few years that this will continue to play a very important role. And again, as I say, there is a huge market potential if you go to my home, and basically all my home appliances have been changed into Xiaomi home appliances, and I feel great about it.
And I am very competent about our home appliance business. Not only that, it has improved our revenue and profit, it has also improved the stickiness of our customers and improved their shopping structure.
Alain, do you have anything to add?
Well, if we look at 2022 for China, is 50.2% and overseas was 40.8%. So it's a similar to the year before. But as Mr. Lu has said that there will be some impact by the new product launch. And overall speaking, I think that it's 50% 50% for China and overseas. For IoT and I think that Mr. Lu has explained that very clearly, so I won't go into details.
Okay, great. Thank you.
Thank you very much. This concludes the conference call.