Xiaomi Bets on 20 Billion HKD Buyback and 3nm Chip to Halt 30% Stock Slide as September Launch Nears

Xiaomi launches $2.55B buyback near 52-week low, invests in proprietary 3nm chip, but net profit falls 57% as smartphone shipments decline 19%.

Xiaomi is walking a tightrope between historic investment in proprietary silicon and a brutal selloff that has erased nearly a third of its market value this year. The stock, hovering just above its 52-week low of €3.04, has drawn an aggressive response from management: a buyback programme worth up to 20 billion Hong Kong dollars (about $2.55 billion). The company has already snapped up 10.5 million of its own shares since the recent trough, kicking off a year-long mandate to buy back up to that ceiling.

The buyback is a short-term salve. The deeper story is Xiaomi’s bet on becoming the first mainland Chinese company to mass-produce a smartphone chip using TSMC’s 3-nanometer process. Its in-house Xuanjie O3 processor, which started rolling off the line in June, delivers a peak performance lift of over 30% and at least a 15% IPC gain versus its predecessor, according to the company. The first device to carry it will be the folding MIX Fold 5. But the technological lead is fleeting — Apple and Qualcomm are both shifting to TSMC’s 2-nanometer node later this year, narrowing Xiaomi’s window of differentiation.

The R&D bill for that chip and others is already steep. First-quarter spending on research and development surged 33.4% year-on-year to 9.0 billion yuan, crushing margins. Net profit tumbled 57% to 4.7 billion renminbi; adjusted for one-off items, the drop was a still-sharp 43% and well below analyst estimates. Component costs are compounding the pain — memory chip prices have nearly doubled amid AI-driven demand and supply bottlenecks.

Those outlays are hitting earnings just as the core smartphone business softens. Xiaomi shipped 33.8 million handsets in the first quarter, a 19% decline from a year earlier. The one bright spot is the premium shift: the average selling price hit a new record, meaning the company makes more per device even as volumes shrink. But rising input costs threaten to erode those gains.

The next big test comes in September. According to well-known industry insider Digital Chat Station, Xiaomi will launch its 18-series in China that month — timing that aligns with Qualcomm’s expected unveiling of the Snapdragon 8 Elite Gen 6. Xiaomi aims to be the first OEM to ship a phone with that chip. The line-up initially includes a flat-screen standard model with a 6.4-inch 2K display and a Pro variant. The Ultra model has been paused over surging component costs, with a later debut possible at a price above 10,000 yuan for the first time.

Ahead of the hardware blitz, Xiaomi plans to release HyperOS 4 between July and August, freshening the software layer before the new flagships arrive. The company is also pushing deeper into custom chip architecture. President William Lu confirmed that an improved version of the in-house XRING chip is on track for this year, featuring a revamped layout of prime, titanium and little cores rather than traditional big-core clusters.

The September offensive spans three fronts — new chips, new software and new hardware. Whether it convinces the market will hinge on the second-half results, which must show that Xiaomi’s massive upfront spending can translate into sustainable margin expansion. The buyback buys time, but only a return to profit growth can reverse the 30% slide.