Xiaomi Navigates Memory Price Surge in Smartphone Market

Xiaomi launched its latest flagship smartphones globally on Saturday as an unprecedented surge in memory chip prices threatens to dampen sales. The Xiaomi 17 and 17 Ultra represent the Chinese technology giant’s top-tier devices aimed at challenging Samsung and Apple in the high-conclude segment of the market.

Maintaining Prices Amidst Rising Costs

Xiaomi, currently the third-largest smartphone player globally, has maintained the prices of the recent devices compared to last year’s flagships, despite a significant increase in memory prices – a critical component for smartphones. The Xiaomi 17 starts at 999 euros ($1,179) while the Xiaomi 17 Ultra begins at 1,499 euros.

The Memory Chip Crunch

In the first quarter of the year, memory prices have soared between 80% and 90%, according to Counterpoint Research. This surge is driven by a shortage of memory chips, with supply being directed toward data centers for AI applications. A Gartner forecast from February predicts smartphone prices could rise 13% in 2026.

Market Outlook and Potential Decline

IDC forecasts the smartphone market to decline 12.9% in 2026 as a result of the chip crunch. Analysts suggest that companies selling more expensive phones will be better positioned to absorb these increased costs.

Xiaomi’s Vulnerability

The bulk of Xiaomi’s sales volume comes from mid-range devices, a category that could be significantly impacted by price increases. “This year will be even worse given that Xiaomi does not have a very strong premium share which means that they cannot rely on the premium segment to offset low margins in other devices like Apple and Samsung can,” Francisco Jeronimo, a vice president for data and analytics at IDC, told CNBC.

Strategic Diversification

In November, Xiaomi management warned that the industry would likely have to raise smartphone prices in 2026. Ben Wood, chief analyst at CCS Insight, said that Xiaomi will likely have to increase prices of their low-to-mid-tier devices. While Xiaomi still generates the majority of its revenue from consumer electronics, the company has been expanding its electric vehicle business in China, which now accounts for approximately a quarter of all sales. This diversification has become an significant revenue source amid the memory crunch.

Recent Financial Performance

Xiaomi reported a 3% year-on-year decline in smartphone revenue in the September quarter, the last publicly available financial figures. However, sales at its electric car business surged nearly 200%.