Xiaomi's Silicon Gambit: Can In-House Chips Break the Memory-Cycle Curse?
Published on 08/24/2026 at 14:01 | Redaktion boerse-global.de
Investors scanning Xiaomi's chart this week saw two very different stories. On Friday, the stock closed up 3.9 percent at EUR 3.16, extending a rally that has now reached 13.4 percent since the company's second-quarter earnings landed just over a week ago. By Monday, however, the shares had given back 3.8 percent to trade at EUR 3.04 — a pullback that had nothing to do with Xiaomi itself, but rather a 9 percent plunge in Samsung Electronics after the Korean giant disappointed on shareholder returns, dragging the entire Asian tech complex down with it.
The whipsaw captures the central tension surrounding the Chinese hardware giant right now. The market is clearly warming to Xiaomi's strategic pivot, yet the stock remains 27 percent below its level at the start of the year, with the 50-day moving average at EUR 2.89 offering only modest support and the 200-day average of EUR 3.59 still well out of reach.
The Chip Announcement That Changed the Narrative
At the heart of the renewed optimism is a series of semiconductor announcements that CEO Lei Jun unveiled on August 19. The headline act is the "Xring O3," a 3-nanometer smartphone processor manufactured by TSMC that is slated to debut in September inside the "Xiaomi 18 Fold." Alongside it come two additional silicon projects: the "Xring D100" smart-driving chip, earmarked for vehicles from 2027 onward, and the "Xring O100" AI accelerator.
Lei Jun's comments were characteristically light on specifics — no detailed specifications, no confirmed launch dates beyond the September window. But the strategic signal was unmistakable: Xiaomi is serious about reducing its dependence on external suppliers and, crucially, on the volatile memory-chip prices that have been crushing its margins.
That latter point is the key to understanding why this announcement matters. The second-quarter numbers, published just days before Lei Jun's remarks, painted a sobering picture. The adjusted net profit tumbled 42.6 percent year-on-year to 6.2 billion yuan, while revenue slipped 6.1 percent to 108.9 billion yuan. The culprit was a "memory-chip super-cycle" that drove the smartphone segment's gross margin down to just 8.5 percent.
Should investors sell immediately? Or is it worth buying Xiaomi?
A Two-Sided Bet
For investors, the calculus is straightforward but unforgiving. If the Xring O3 integrates smoothly into the Xiaomi 18 Fold at competitive costs, it would mark Xiaomi's transition from a pure chip buyer to something approaching a self-sufficient designer. That would give the company a second strategic lever alongside its electric-vehicle push — a hedge against the memory-price cycles that have repeatedly punished its core business.
The bear case is equally clear. Three-nanometer manufacturing is among the most technically demanding and capital-intensive processes in the world. Yield problems at TSMC or production costs that exceed projections would leave Xiaomi's structural margin weakness intact while adding a new layer of expenses. The D100 driving chip, meanwhile, won't reach vehicles until 2027 at the earliest, meaning the automotive division — which posted an operating loss of 2.6 billion yuan in the second quarter on revenue of 24.9 billion yuan — remains dependent on third-party components and deeply unprofitable in the interim.
Should memory prices stay elevated while chip development costs ramp up, the two pressures could compound rather than offset each other.
The EV Engine Keeps Turning
The automotive story, at least, continues to gain momentum. Cumulative deliveries of the SU7 sedan crossed the 500,000-vehicle mark on August 17, with 104,199 units handed over in the second quarter alone. A new SUV line, "SkyNomad," is scheduled for a September reveal, potentially giving Xiaomi two growth pillars — EVs and self-designed silicon — to lean on as the smartphone business fights its margin battle.
Reuters has reported that Xiaomi sees the worst of the memory-price pressure as behind it, with management expecting the pace of increases to moderate in the second half. That expectation, more than any single product announcement, appears to be driving the recent share-price recovery.
What September Will Tell Us
The coming weeks will serve as a live test of whether the chip strategy is more than a technological showpiece. The Xiaomi 18 Fold launch in September will be the first real-world trial of the Xring O3, followed by the SkyNomad SUV presentation in the same month. Both events will show whether Xiaomi can execute on its diversification plan without letting the smartphone margin bleed spiral further.
With 30-day annualized volatility at 61 percent and an RSI of 57.0, the stock remains firmly in speculative territory — neither overbought nor oversold, but prone to sharp swings in either direction. The bull case rests on a simple proposition: that Xiaomi can stabilize its core margins through vertical integration before the next memory-cycle shock arrives. The bear case is equally simple: that chip development costs will arrive before the margin benefits do, squeezing profitability from both ends.
For now, the market is giving Xiaomi the benefit of the doubt. The next few months will determine whether that faith is justified.
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