China’s Xiaomi has issued a blunt warning that smartphone buyers should brace for even steeper price tags next year, citing soaring memory-chip costs that have already begun squeezing margins across the industry.
According to Reuters, the company admitted that even aggressive retail price increases will not be enough to fully absorb the pressure.
The caution came from Xiaomi President Lu Weibing during an earnings call on Tuesday, where he described the rising cost of memory components as a growing headache that will become “much heavier next year than this year.”
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His remarks reflect a tightening supply chain shaped by unprecedented demand for memory chips used in artificial intelligence servers. Global chipmakers — including Samsung — have shifted large swathes of production capacity toward high-bandwidth memory (HBM), the premium chips essential for AI data-center infrastructure. At the same time, they have cut output of the lower-priced chips used in consumer electronics like smartphones, pushing up prices across the board.
Lu said consumers should expect a “sizeable rise” in smartphone retail prices. He added that Xiaomi will have no choice but to pass some of the added costs on to buyers, though even that won’t be “enough to digest it.”
His comments follow complaints from customers who had expressed disappointment at the pricing of Xiaomi’s new Redmi K90. Lu disclosed last month that the surge in memory-chip prices had pushed up production costs for that model.
Despite rising component costs, Xiaomi managed to ship 43.3 million smartphones worldwide in the third quarter. The figure represents a slight 0.5% year-on-year rise and keeps Xiaomi in third place globally with a 13.6% market share, according to data from Omdia cited in the company’s financial report.
Still, the cost pressure is clearly visible in its earnings. Total revenue for the quarter came in at 113.1 billion yuan ($16 billion), up 22.3% but missing the 116.5 billion yuan average analyst estimate from LSEG. Its Hong Kong-listed shares closed down 2.81% after the earnings release, though the stock remains up 18.2% for the year.
EVs and AI Drive Revenue — and Deliver a Surprise Profit Turnaround
Beyond smartphones, Xiaomi pointed to significant gains in its electric-vehicle and artificial intelligence segments, which continue to reshape the company’s earnings profile. It reported that EVs, AI, and other new initiatives now account for 25% of its total revenue.
In the third quarter, Xiaomi’s adjusted net profit surged 80.9% year-on-year to 11.3 billion yuan, beating the average forecast of 10.3 billion yuan from LSEG analysts.
The company’s EV unit delivered a standout performance. Revenue from EVs hit 28.3 billion yuan in the quarter, rising from 20.6 billion yuan in the second quarter and 18.1 billion yuan in the first. Xiaomi delivered 108,796 vehicles in the period — a jump from 81,300 in the second quarter, which did not yet include sales of its new YU7 electric SUV. The YU7 began shipping after its June launch and contributed to the higher volumes.
Critically, Xiaomi said its EV, AI, and new initiatives segment turned an operating profit for the first time — around 700 million yuan — marking a milestone in the company’s diversification strategy.
The Smartphone Market Is Heading Toward Its Next Inflation Wave
Xiaomi’s warning underscores a broader shift unfolding across the global smartphone industry. Manufacturers rely heavily on commodity memory chips, and when supply tightens, the effects ripple through retail pricing almost immediately. The problem is that AI is consuming capacity at a pace never seen before — and there is no sign of relief in 2025.
The shift by major chip producers toward HBM production shows that the AI boom is now directly shaping consumer-device economics. For companies like Xiaomi that play aggressively in mid-range and budget segments, even modest cost inflation on key components can threaten price positioning.
That’s why Lu’s warning matters. If Xiaomi, known for tight pricing, expects to push prices higher, rival brands that depend on similar memory suppliers will likely follow.
At the same time, Xiaomi’s expanding EV and AI portfolio is giving it insulation that pure-play smartphone companies don’t enjoy. The strong performance of its EV division, along with improved profitability in new initiatives, helps offset the drag created by rising smartphone component costs. Its ability to cross-subsidize or reallocate earnings may influence how aggressively it absorbs cost spikes next year.
Still, the company was clear that even with price increases, the chip surge is too large to fully swallow. That means consumers globally, not just in China, are likely walking into another wave of smartphone inflation in 2025.