(CapitalWatch, Nov. 23, Hong Kong) Smartphone giant Xiaomi Corp. (OTC: XIACY; HKEX: 1810) reported solid but underwhelming growth in its third quarter earnings report as the company is faced with supply chain disruptions and tough competition in China.

Xiaomi reported an 8.2% year-over-year growth in revenue to 78 billion yuan ($12.2 billion) and its gross profit margin increased from 14% in the third quarter of last year to 18% in the third quarter of 2021.

A major roadblock to Xiaomi's progress is one plaguing companies worldwide for over a year: a shortage of semiconductors. Demand for semiconductors, an essential component of electronic circuits found in most everyday technology, exploded in 2020. Consumer demand for electronics rose due to Covid-19, and demand has surged for automakers as the industry increasingly adopts driver assistance and autonomous driving technology that heavily relies on semiconductors. This shortage has caused companies to scramble as they attempt to meet demand with such little supply, and due to the cost and difficulty of manufacturing semiconductors, competition is slow to join the market.

Xiaomi pointed to the shortages of essential chips for much of its slowed growth. Company president Wang Xiang said the shortages caused "fairly big pressure" for the company, but it expects these troubles to ease up in 2022. Xiaomi reported a 4.6% decline in shipments after huge growth during the previous four quarters, but still holds the number three spot for global smartphone shipments with a 13.5% market share and shipments reaching 43.9 million.

Although it fell below expectations and lost its briefly held spot as the world's number two smartphone vendor to Apple Inc. (Nasdaq: AAPL), Xiaomi is still maintaining its spot as an industry leader. 

Active users of Xiaomi's MIUI smartphone increased 32% year-over-year, reaching just under 486 million. The company also reported that its Artificial Intelligence of Things (AIoT) platform continues to scale up and as of Sept. 30 the number of connected IoT devices- excluding smartphones, tablets and laptops- on Xiaomi's platform exceeded 400 million for the first time, and over 8 million users have five or more devices connected to the platform. 

In Hong Kong on Tuesday, Xiaomi's stock fell 1% to HK$20.70 per share and is down about 8% over the past month. In OTC, shares were down 1% to $13.04 today.