Xiaomi's Two-Front Battle: Memory Costs Bite as Chip Independence Beckons

Xiaomi's Q2 profit fell 42.6% due to high memory prices; it unveiled the Xring O3 chip and plans the Xiaomi 18 Fold with CXMT LPDDR6 memory.

The arithmetic of Xiaomi's latest earnings tells a story that extends far beyond one company's balance sheet. When the Beijing-based electronics giant reported its first-half results last Tuesday, the numbers laid bare just how exposed the entire smartphone industry has become to a single bottleneck: the price of memory chips.

Revenue slipped 6.1 percent year-on-year to 108.9 billion yuan in the second quarter, missing the 112.2 billion yuan that analysts had penciled in. The adjusted net profit figure was starker still, tumbling 42.6 percent to 6.2 billion yuan — also shy of consensus. The culprit, as Reuters noted, was historically elevated pricing for memory and other components, which squeezed smartphone margins for the first time in three quarters.

A Strategic Pivot in Silicon

The margin pressure has sharpened the urgency behind Xiaomi's semiconductor ambitions. On August 24, the company unveiled its Xring O3 handset chip, a made-in-house processor built on a 3-nanometer process. The design marks a meaningful step toward greater control over its hardware architecture — yet the manufacturing itself remains outsourced to TSMC, a compromise that underscores how capital-intensive true vertical integration in the chip world has become, even for a company with Xiaomi's financial heft.

That design-here, fabricate-there approach now extends to memory as well. Xiaomi confirmed on Weibo on Friday that its upcoming Xiaomi 18 Fold — slated for a September unveiling — will be the first smartphone to ship with LPDDR6 memory from Chinese manufacturer CXMT. The new chips, which CXMT says it brought to mass production in under twelve months from the LPDDR5 standard's introduction, deliver transfer rates up to 12,800 megatransfers per second and come in 16-gigabyte capacities. Paired with the Xring O3, the Fold can drive memory bandwidth of 113.8 gigabytes per second.

The CXMT tie-up carries geopolitical weight. The US Defense Department designated the memory maker as a Chinese military company in January 2025, a classification CXMT is contesting in court. That Apple is reportedly seeking US approval to source CXMT chips for its own iPhones and MacBooks only underscores the supplier's growing industry clout.

The Broader Product Blitz

September brings more than the Fold. The Xiaomi Pad 9 Pro Max, also powered by the Xring O3, is expected with a 13-inch display, a battery north of 10,000 milliampere-hours, and 120-watt fast charging. The Redmi 17 5G launches in India on September 3 with a 7,900 mAh battery and Qualcomm's Snapdragon 4 Gen 5. Xiaomi is also testing a privacy feature in a HyperOS beta that blocks side-angle views of apps and notifications — potentially destined for the Xiaomi 18 series.

The company has poured more than 20 billion yuan into chip development and assembled a team of over 3,000 engineers for the effort. On the product front, the Redmi Note 17 series arrived on August 27, including a Pro Max variant with a 9,210 mAh battery.

The EV Ambition and the Stock's Reality

Diversification extends beyond silicon. Xiaomi's electric-vehicle business is expected to contribute a growing share of revenue, a tacit acknowledgment that smartphones alone can no longer drive growth. Management has also signaled cautious optimism that memory-price pressure could ease in the second half, though that remains a hope rather than a guarantee.

The market, meanwhile, has already rendered its verdict. Shares closed Friday at 3.07 euros, up 2.4 percent on the day — a modest bounce that does little to offset a 29 percent decline since the start of the year. Over twelve months, the stock has nearly halved, and it sits 53 percent below its 52-week high of 6.54 euros, reached late last September. The 30-day picture shows a 15 percent slide.

What investors are weighing now is whether Xiaomi can simultaneously defend its smartphone margins against memory-cost headwinds, scale an EV business from a standing start, and execute a credible chip strategy — all while navigating the geopolitical currents that now run through its supply chain. The autumn product cycle, and the quarterly numbers that follow, will offer the first real test of whether that multi-front strategy can hold.