Record Smartphone Prices Can’t Mask Xiaomi’s Memory-Chip Margin Crunch
Published on 07/18/2026 at 13:43 | Redaktion boerse-global.de
The juxtaposition of opposites has become Xiaomi’s unmistakable theme in 2026. The Chinese technology group booked a record average selling price for its smartphones during the first quarter, yet its handset gross margin collapsed and overall profit nearly halved. The culprit, executives and analysts agree, is a relentless surge in memory chip costs that is punishing low-end devices most – precisely the segment where Xiaomi has built its empire.
Revenue for the three months ended March came in at 99.142 billion yuan, a drop of 10.9 percent from a year earlier and the first time since late 2024 that quarterly sales slipped below the 100-billion-yuan mark. Adjusted net profit plunged 43.1 percent to 6.072 billion yuan, ending a streak of five consecutive quarters above that threshold. The smartphone division, Xiaomi’s traditional cash cow, generated 44.3 billion yuan in revenue, down 12.5 percent, as shipments tumbled 19.2 percent to 33.8 million units. The gross margin in that segment shrank from 12.4 percent to just 10.1 percent, squeezed by memory chip costs that rose 60 to 70 percent quarter-on-quarter in the first three months alone.
The memory-price crisis is not new. Spot prices for DRAM and NAND flash have more than quadrupled over the past year, hitting entry-level and mid-range devices the hardest because storage and memory account for a much larger slice of their total bill of materials. Xiaomi’s strategy of targeting the sub-$400 sweet spot has therefore become a liability. While the company’s average phone price reached an all-time high of 1,310 yuan, margins in the lower tiers are evaporating. The global smartphone market itself shrank 4 percent year-on-year in the second quarter, with Samsung and Apple each gaining two and four percentage points of market share respectively. Xiaomi clung to third place at 11 percent but lost meaningful ground. Relief appears distant: analysts do not expect memory prices to meaningfully ease until the second half of 2027, and the seasonal demand spike later this year could even tighten supply further.
Faced with this pressure, Xiaomi has counter-attacked on multiple fronts. Research-and-development spending jumped 33.4 percent to 9 billion yuan in the first quarter, with the R&D headcount rising to 26,048. The company plans to invest at least 16 billion yuan in artificial intelligence this year and more than 60 billion yuan over three years. Its open-source large language model, MiMo-V2.5-Pro, recently tied for first place in global open-source benchmarks, and new flagship smartphones using Qualcomm’s Snapdragon 8 Elite Gen 6 chipset – built on a 2-nanometer process – are due this autumn.
Should investors sell immediately? Or is it worth buying Xiaomi?
At the same time, Xiaomi is pressing ahead with a 20-billion-Hong-Kong-dollar share buyback programme that began on June 2, 2026, and runs for one year. As of mid-July the company had executed 58 buyback transactions, spending more than 8.1 billion Hong Kong dollars. On July 17 it purchased 3.8 million shares at prices between 26.88 and 27.00 Hong Kong dollars, followed by another 2.8 million shares the next day for about 24.4 million Hong Kong dollars. The buyback, however, has struggled to offset sentiment: after the first-quarter results were published, the Hong Kong-listed stock dropped 4.57 percent to 28.4 Hong Kong dollars.
The electric-vehicle division has become a rare bright spot. In the first quarter, the Smart EV & AI segment generated 19.9 billion yuan in revenue, up 6.9 percent, on deliveries of 80,856 vehicles. Core operating profit at the group level nearly doubled sequentially. Xiaomi is now gearing up for the next phase: on June 10 it received regulatory approval for its first range-extended electric vehicle (EREV), codenamed “Kunlun N3,” which will be sold under the new sub-brand SkyNomad. The full-size SUV measures more than 5.3 metres in length with a wheelbase of approximately 3.1 metres, uses a 1.5-litre range extender and all-wheel drive via two electric motors. It targets a pure-electric range of 400 to 500 kilometres and a combined range of over 1,500 kilometres, with launch scheduled for the second half of 2026 and a price range of 20,000 to 45,000 yuan.
On the bourse, the German-listed shares ended Friday at €3.03, down 1.43 percent on the day. The stock has recovered roughly 30 percent from its 52-week low of €2.34 set in late June, but it still sits more than 53 percent below the 52-week high of €6.51 reached last September. The 200-day moving average remains 20.66 percent above the current price, underscoring that the medium-term downtrend has yet to be broken.
Xiaomi at a turning point? This analysis reveals what investors need to know now.
Xiaomi finds itself walking a tightrope: a cash pile of more than 220 billion yuan and aggressive buybacks signal management’s confidence, but the core phone business is being strangled by input-cost inflation, and the long-term bets on electric vehicles and artificial intelligence have not yet produced the scale to offset the damage. For now, the market is watching for signs that Xiaomi can shift its product mix further up the price ladder – a move that could eventually free it from the memory-chip trap in the entry-level segment.
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