Xiaomi’s Strategic Pivot Meets Market Skepticism

Xiaomi KYG9830T1067

Xiaomi's stock performance tells a story of divergence. While the company's share price has retreated significantly from recent highs, its strategic investments in semiconductors and electric vehicles are accelerating. This contrast highlights the challenges facing the Chinese tech giant as its core smartphone business navigates a shifting domestic landscape.

Investor sentiment has cooled considerably. Xiaomi's shares recently closed at 37.10 HKD, marking a weekly decline of approximately 4% from 38.74 HKD. The current price sits roughly 40% below its 52-week peak of 61.45 HKD, which was recorded in late June 2025. The stock's 52-week low stands at 32.20 HKD, reached in January 2025. With a market capitalization hovering around 1 trillion HKD, the equity is clearly facing headwinds despite operational advances in several forward-looking sectors.

Semiconductor Strategy: Prioritizing 3nm Over 2nm

In its push for technological independence, Xiaomi is developing its second in-house flagship chip, the Xring O2. Industry sources indicate the processor will be manufactured using TSMC's N3P node. The company is reportedly bypassing the latest 2nm generation for now, a decision influenced by cost considerations and capacity constraints at the contract manufacturer.

This move continues a path set by its predecessor. Xiaomi made headlines by launching the Xring O1 in early 2025, becoming the first Chinese firm to introduce a proprietary 3nm flagship mobile chip, produced on TSMC's N3E process. The anticipated launch of the Xring O2 in the first half of 2026 could grant Xiaomi a temporary process advantage. Competing 2nm chips from Apple, Qualcomm, and MediaTek are not expected until September 2026, though this lead would likely narrow in the latter half of that year.

Electric Vehicle Ambitions Gain Traction

The electric vehicle division is where Xiaomi's growth narrative is most aggressive. The company has set a delivery target of 550,000 units for 2026. This represents planned growth of about 34% compared to the more than 410,000 vehicles delivered in 2025.

Early signs of operational success are emerging:
* The EV segment reported its first quarterly profit in Q3 2025.
* December 2025 saw over 50,000 vehicle deliveries, setting a new monthly record.

To fuel this expansion, Xiaomi plans to introduce four new models in 2026:
* A facelift for the SU7 sedan (first half)
* A seven-seat extended-range SUV (first half)
* An executive version of the SU7 (second half)
* A five-seat extended-range SUV (second half)

This strategy broadens the product lineup, with a particular focus on the SUV segment and higher-priced tiers.

Core Smartphone Business Faces Headwinds

The picture in Xiaomi's domestic smartphone market is less rosy. According to Omdia, the company shipped 43.7 million devices in China during 2025, a 4% year-over-year increase. This secured a 15% market share and fourth place overall.

However, momentum weakened in the critical fourth quarter of 2025:
* Shipments totaled 10 million units.
* This represented an 18% decline compared to the same quarter the previous year.
* Its market rank fell behind Apple, Vivo, OPPO, and Huawei.

This places the core business under noticeable pressure in its home market, compounded by new competitors and established brands challenging its position in the premium segment.

Rising Costs and Strategic Launch Timing

Increasing component costs present an additional challenge. Market analysts identify rising memory costs as a key risk for 2026. In response, Xiaomi moved up the launch of its flagship Xiaomi 17 Ultra model to December 2025, aiming to secure a timing advantage in a competitive landscape.

Conclusion: Balancing Short-Term Pressure with Long-Term Bets

The current stock weakness reflects the tension within Xiaomi's business model. The traditional smartphone engine is losing steam in China just as the company makes substantial bets on its proprietary chip development and a capital-intensive expansion into electric vehicles.

In the near term, the narrative is shaped by rising costs and market share losses in smartphones. The medium- to long-term outlook, however, hinges on two key deliverables: the timely launch of the Xring O2 chip in the first half of 2026, and the EV division's ability to hit its 550,000-unit delivery target while successfully introducing its new model lineup.