Xiaomi's Memory-Chip Squeeze Tests a Pivot Built on Cars and Software
Published on 08/20/2026 at 14:22 | Redaktion boerse-global.de
The arithmetic of Xiaomi's current predicament is brutally simple: memory chips cost more, phones earn less per unit, and the company's answer has been to charge customers more while pouring billions into electric vehicles and artificial intelligence. Whether that balancing act holds depends on a single question nobody can yet answer — when will DRAM prices actually ease?
The pressure originates upstream. Changxin Memory Technologies (CXMT), the Chinese semiconductor maker, has reportedly rebuffed Apple's demands for cheaper LPDDR5X memory, keeping procurement costs for DRAM components stubbornly high. Analysts say that dynamic will continue to weigh on Xiaomi's hardware margins through the current half-year, even as the company tries to offset it with aggressive pricing at the consumer end.
That strategy has produced a striking number: Xiaomi's average selling price (ASP) in smartphones climbed 26 percent to $188, a record that softened what would otherwise have been a sharper revenue decline in the segment, which still fell to $6.25 billion. Management, presenting interim results for the first half of 2026, said the smartphone gross margin held at 8.5 percent — a figure that captures the tightrope walk between raising prices and staying competitive.
A Quarter of Contradictions
The second-quarter numbers, released last Tuesday, laid the tensions bare. Revenue reached 108.9 billion renminbi, roughly $16.0 billion, beating market expectations despite a currency-adjusted decline of 6.1 percent year on year. Adjusted net profit rose 2.4 percent quarter on quarter to 6.2 billion renminbi. But strip out the adjustments and the picture darkens: unadjusted profit fell to $602 million, dragged down by $532 million in AI infrastructure spending and heavy investment in scaling the EV business.
Investors have so far chosen to focus on the brighter side. The stock jumped around 6 percent in Hong Kong trading on the day of the release and has since added another 9.0 percent. Over the past seven trading sessions, the shares have gained 7.1 percent, trading at €3.04 in recent sessions — just above the 50-day moving average of €2.89 but still far below the 200-day average of €3.61. The 30-day annualized volatility of 61 percent suggests the market remains skittish.
Should investors sell immediately? Or is it worth buying Xiaomi?
The distance from the peak tells a sobering story. At €3.04, the stock sits 54 percent below its 52-week high of €6.54, reached at the end of September last year. That gap is a reminder that structural concerns about memory costs and margin compression have not been fully priced out.
The EV Engine Kicks In
The counterweight to the smartphone squeeze is the electric vehicle business, which is scaling at a pace that has surprised even optimistic observers. Cumulative deliveries of the SU7 surpassed 500,000 units on Monday, according to media reports. In the second quarter alone, Xiaomi delivered 104,199 vehicles, up from 80,856 in the first quarter — a trajectory that has turned the car division into a genuine second pillar.
The "EV, AI and other new initiatives" segment generated 24.9 billion yuan in the June quarter, a growing share of the 108.92 billion yuan total. Reuters analysts see the EV business playing a pivotal role going forward, particularly if memory costs ease in the second half.
The company is also refreshing its software stack. HyperOS 4 entered beta testing last Friday for selected devices, though no global rollout date has been announced. The move complements a hardware push into the smart-home ecosystem, where partner Seeed Studio unveiled new "XIAO" microcontroller boards for Xiaomi's IoT platform last Thursday — a signal that the company sees connected appliances as another growth avenue beyond phones and cars.
Pricing Power Has Limits
Xiaomi has not been shy about passing costs to consumers. In early August, it raised prices on several flagship models in the 17-series and the Redmi K90 portfolio by 300 to 500 yuan, a move media reports attribute directly to higher component costs.
The question hanging over the stock is whether pricing power can hold long enough for memory prices to normalize. Research and development spending rose 33.4 percent to 9.0 billion renminbi in the first quarter, underscoring the company's willingness to sacrifice near-term profit for long-term positioning.
For now, the bulls point to operational momentum in EVs and the software refresh as evidence of structural diversification beyond the thin-margin smartphone business. The bears counter that every incremental dollar in component costs eats into the investment capacity Xiaomi needs to sustain that diversification. Neither side can predict with certainty when the DRAM cycle will turn — and until it does, the stock's recovery remains a work in progress.
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