Xiaomi's Twin Pressures: A Memory-Chip Squeeze Collides With EV Momentum

Xiaomi's smartphone margins shrink amid doubled chip costs, while EV deliveries hit 500K but losses continue; group profit drops 20%.

The arithmetic at Xiaomi is growing harder to balance. On one side sits a smartphone business grappling with component costs that have doubled in a single quarter; on the other, an electric-vehicle arm that just crossed a symbolic delivery milestone but continues to bleed money. The market, for now, appears willing to reward the progress — though the stock's longer-term chart tells a more sobering story.

Memory-chip prices for DRAM and NAND components doubled in the second quarter of 2026, according to Bloomberg, a surge that caught the company off guard and compressed its smartphone gross margin to 8.5 percent. The cost shock arrived just as Xiaomi was already navigating a strategic shift toward pricier handsets. Shipments fell 26.5 percent to 31.2 million units during the period, while the average selling price climbed 25.9 percent to 1,351 yuan — a premium-pivot that only partially offsets the memory-chip bill.

That pricing strategy has been partly reflected at the retail level. In early August, Xiaomi raised prices on several flagship models in its 17-series lineup and the Redmi K90 portfolio by 300 to 500 yuan, a move media reports attributed to the higher component costs.

The EV Division Hits a Milestone, Still Loses Money

The counterweight to the smartphone weakness is the automobile business. Cumulative deliveries of the SU7 electric sedan crossed the 500,000-unit threshold on Monday, with 104,199 vehicles shipped in the second quarter alone — a 28.2 percent increase. Segment revenue for "EV, AI and other new initiatives" rose 17.1 percent to 24.9 billion yuan, an expanding slice of the group's 108.92 billion yuan in total quarterly sales.

Yet the unit remains firmly in the red, posting an operating loss of 2.6 billion yuan. Xiaomi is pouring resources into the division: of the 3.6 billion yuan in capital expenditures, 2.4 billion yuan went toward EVs and artificial intelligence, while research and development spending climbed 19 percent to 9.2 billion yuan.

The automotive push is drawing attention beyond Xiaomi's own books. Handelsblatt reports that Xiaomi, as a new customer, is helping offset weakness among German stalwarts at Infineon, which describes itself as the global leader in automotive chips. Stellantis, meanwhile, is reportedly in talks with both Xiaomi and Xpeng over potential partnerships and possible brand stakes.

Group-Level Damage and a Cautious Outlook

The memory-chip crunch is industry-wide, but it stings Xiaomi more than most because its lower-margin smartphone unit still generates the largest share of revenue. Group revenue fell 6.1 percent to 108.92 billion yuan in the second quarter, while net profit dropped 20.3 percent to 9.46 billion yuan. Adjusted net income fared worse, sliding 42.6 percent to 6.22 billion yuan, and the overall gross margin contracted from 22.5 percent to 19.8 percent.

On the product front, the company is preparing a response. Media reports from last month's ChinaJoy expo point to an upcoming Redmi K100 series featuring an 8,500-mAh battery and a 200-megapixel camera. September could also bring the China launch of the Xiaomi 18 series, paired with the new HyperOS 4 operating system, which entered beta testing for select devices last Friday after being announced the day before. A global rollout date has yet to be confirmed.

Whether that product offensive can offset the memory-chip headwinds remains an open question for the second half of the year. Reuters analysts have suggested the EV business could play a growing role in the company's narrative, particularly if component cost pressures ease.

A Stock Caught Between Recovery and Reality

The shares have found some footing since Tuesday's earnings release, gaining roughly 9.1 percent in the days that followed. The stock currently trades around 3.04 euros, about 5.4 percent above its 50-day average of 2.89 euros — though it remains well below the 200-day average of 3.61 euros. The 30-day annualized volatility of 61 percent underscores how skittish trading in the name remains.

The longer-term picture is less forgiving. The stock is down 30 percent year-to-date and 47 percent over the past twelve months. At its current level, it sits roughly 53 percent below the 52-week high of 6.54 euros reached last September.

The bulls point to genuine structural progress: the SU7's half-million delivery milestone, the software refresh with HyperOS 4, and a diversification story that extends beyond the margin-strained phone business. But the bears have a simpler question — how quickly will memory-chip prices actually ease? Until that answer becomes clearer, the stock's recovery may remain as volatile as the component market that triggered the sell-off in the first place.