Xiaomi's Two-Front War: Memory-Chip Inflation Tests a Stock Already Down 54%

Xiaomi's smartphone margins are hit by surging memory prices, while its EV unit burns cash. September launches aim to counter the pressure.

The arithmetic facing Xiaomi shareholders is brutally simple. The company's core smartphone business is absorbing a component-cost shock that has quadrupled memory prices year-on-year, while its electric-vehicle division—the growth engine meant to justify the stock's premium—is still burning cash at a rate of 5.7 billion yuan per half-year. Squeezed between those two forces, the shares trade at roughly €3.02, some 54 percent beneath the €6.54 peak touched in September 2025.

That gap between promise and performance is widening just as the company prepares its most consequential product offensive to date. September brings the Sky Nomad EV lineup and the Xiaomi 18 Fold, the latter billed as the world's first smartphone to ship with LPDDR6 memory from domestic supplier CXMT. The timing is no accident: Xiaomi needs every technological edge it can muster against a memory-market cycle that is turning decisively against handset makers.

A Cost Shock With No Easy Escape

Xiaomi president Lu Weibing has been characteristically blunt about the problem. Memory costs in the first quarter of 2026 nearly quadrupled year-on-year, a surge that has already forced the company—alongside Huawei and Honor—to raise prices on several models this week, with flagship devices up by as much as 1,000 yuan. It marks the second price increase within a month for lines like the Mi 17 and Redmi K90.

The pressure is industry-wide. TrendForce projects DRAM contract prices will climb another 13 to 18 percent in the third quarter of 2026. South Korea's DRAM export prices had already risen 24.3 percent by late July, while HBM chips have crossed the $70-per-unit threshold for the first time. For a company that sells tens of millions of smartphones annually, these are not rounding errors.

The strategic counterweight is CXMT, which began mass production of LPDDR6 chips in late August—a global first. The Xiaomi 18 Fold will pair that memory with the company's in-house Xring O3 processor, which delivers 48 percent greater bandwidth than its predecessor. If Xiaomi can lean on domestic suppliers to reduce its dependence on Samsung, SK Hynix, and Micron, the cost trajectory could soften in the medium term. That is the bull case, and it rests on a genuinely novel supply-chain position.

The EV Engine: Growing, But Not Yet Profitable

The automotive story is more encouraging on volume, less so on the bottom line. August marked the fifth consecutive month of deliveries above 30,000 vehicles, though Xiaomi declined to publish the exact figure. The first eight months brought roughly 246,300 units—about 44.8 percent of the 550,000-unit annual target.

Second-quarter figures showed real momentum: smart-EV and AI revenue rose 17.1 percent to 24.9 billion yuan, with vehicle deliveries up 28.2 percent to 104,199 units. That improvement followed a first half in which the auto and AI segment posted a 12 percent revenue gain alongside that 5.7 billion yuan operating loss—evidence that scale is building, but not yet sufficient to offset the segment's heavy investment phase.

The longer-term ambition extends well beyond China. Xiaomi has confirmed European sales will begin in 2027, with an international website already live and a dedicated X account launched on August 26. The company is fielding the SU7 sedan, the YU7 SUV, and the Sky Nomad, a seven-seat extended-range electric vehicle measuring 5.28 meters with a 76 kWh battery good for roughly 500 kilometers of electric range. The Ultra variants push up to 1,547 horsepower.

The IFA 2026 trade show in Berlin is serving as an early brand-building exercise, with the SU7 Max, SU7 Ultra, and the Vision GT concept on display. A Munich research center is already operational, and the company has poached engineers from BMW, Porsche, and Tesla in pursuit of a stated goal: a top-five premium brand position in Germany by 2030.

The competitive landscape in Europe is getting crowded. Chinese brands already hold 9 percent of the European market as of the first half of 2026—15 percent in the UK—and AlixPartners analysts project that share could reach 16 percent in the EU by 2030. Huawei and Li Auto are pushing into the same territory, and early signs of strain are visible: Huawei's HIMA brand reported declining deliveries in August.

Delivery Data Points Both Ways

The numbers behind the EV push tell a more nuanced story than the headline growth suggests. Xiaomi claims roughly 500,000 SU7 units sold since the model's 2024 launch, and about 760,000 total vehicles delivered when including the YU7, available since February 2025. July deliveries came in at 31,267 units—a modest 2.7 percent year-on-year increase that marks a notable deceleration from the triple-digit growth rates of earlier phases.

On the positive side, a recent test of the Sky Nomad N90 Max recorded approximately 1,230 kilometers on a Shanghai-to-Beijing run with four passengers aboard, stretching to about 1,284 kilometers in eco mode. The March refresh of the SU7, promising greater range and upgraded sensors, should provide another demand catalyst.

What the Market Is Really Pricing

The stock's 30 percent decline since the start of the year suggests investors are discounting the long-term automotive narrative against near-term margin erosion. The market reaction to the Europe announcement was telling: shares closed Monday at €3.03, down 1.2 percent, with the expansion plans doing little to offset concerns about the core business.

The critical test arrives this month. The Sky Nomad and Xiaomi 18 Fold launches will demonstrate whether the company can hold pricing power in smartphones while its EV division continues its march toward scale. If delivery numbers stay above the 30,000 monthly threshold and the second-quarter margin improvement persists, the growth narrative holds. If memory costs keep climbing faster than CXMT and Xiaomi's own chip efforts can offset, the margin squeeze tightens—and the stock's discount to its 52-week high may look increasingly justified.

The next quarterly results will show which scenario is playing out. For now, Xiaomi is betting that its September product wave, combined with a domestic memory supply chain no rival can match, will be enough to bridge the gap between its current losses and its European ambitions.