Xiaomi’s Smartphone Slump Deepens as In-House Chip Strategy Faces a Cost Squeeze

Xiaomi is racing to reinvent itself with a proprietary processor, a new operating system, and a growing electric-vehicle business, yet the stock is trading barely above its 52-week low of €3.38, having shed nearly half its value from last summer’s peak. The disconnect between the company’s technological ambitions and its market performance has rarely been starker.

The immediate pressure comes from the smartphone side, where the numbers are ugly. Preliminary IDC data shows global shipments tumbled to 33.8 million units in the first quarter of 2026, down 19.1 percent from 41.8 million a year earlier. Market share slipped from 13.8 percent to 11.7 percent. While Xiaomi still holds the number-three spot worldwide, no other top-five manufacturer lost ground as quickly. The company deliberately wound down older models to sidestep price adjustments, a move that underscores how thin its margin of error has become.

On its home turf in China, the damage was even more severe. Omdia figures reveal a 35 percent plunge to 8.7 million units, knocking Xiaomi entirely out of the domestic top five. In response, the company rushed the launch of the Xiaomi 17 Ultra, throttled entry-level shipments, and began raising prices on select models from mid-April.

The culprit is a brutal spike in memory-chip costs. DRAM contract prices surged roughly 90 percent in the quarter, while NAND flash prices jumped 50 to 60 percent, according to IDC. In emerging markets — precisely where Xiaomi’s value-for-money proposition has been strongest — retail prices climbed 40 to 50 percent. TrendForce expects DRAM prices to rise more than 50 percent for the full year. Samsung and SK Hynix have already pushed through increases of up to 60 percent, diverting capacity to high-bandwidth memory for AI applications.

Competitors like Lenovo hedged by stockpiling components early. Xiaomi, with its heavier reliance on price-sensitive segments, is structurally more exposed. IDC warns that Android makers focused on the low end will feel the pain most acutely, and not just in the short term.

Against this cost headwind, Xiaomi is betting big on vertical integration. The upcoming MIX Fold 5 will be the first device to carry the company’s own processor, the Xuanjie O3, built on TSMC’s 3-nanometer process. It skips a naming generation after a year-long hiatus in the foldable lineup, signaling a direct leap to flagship territory. The phone is expected to run HyperOS 4.0, tailored specifically for foldables and the new chipset’s networking capabilities. Analysts see the move as a long-term play to improve hardware margins that have been structurally thin.

The EV arm is providing some counterweight. Xiaomi Auto delivered around 80,000 vehicles in the first quarter, with more than 39,000 rolling out in January alone — exceeding its own 2025 delivery targets. A recent software update lowered the threshold for activating driver-assistance systems from 1,000 to 300 kilometers driven, and internal studies claim a roughly 30 percent reduction in accident rates when the system is active.

On the AI front, the company’s MiMo V2.5 Pro language model currently ranks first among open-weight models on the Artificial Analysis Intelligence Index. The weights are due to be released as open-source software in the coming days.

The stock, at €3.42, has lost nearly a quarter of its value since the start of the year and is trending below all relevant moving averages. The next major test comes in the week ahead, when concrete timing for the MIX Fold 5 launch could either reignite investor enthusiasm or confirm that the market remains unconvinced. The quarterly earnings report on May 27 will then put the spotlight on margin trends and the EV division’s financial contribution — two factors that will determine whether Xiaomi’s transformation story can finally close the gap between ambition and valuation.

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Xiaomi Stock: New Analysis - 26 April

Fresh Xiaomi information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

Read our updated Xiaomi analysis...

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Xiaomi Stock: New Analysis - 26 April

Fresh Xiaomi information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

Read our updated Xiaomi analysis...