Xiaomi Profit Falls 24% as Memory Costs Force Price Hike Warning

Adjusted Profit Plummets 24% in First Drop Since 2022

Xiaomi's adjusted net profit for the quarter ending December 31 fell 24% year-over-year to 6.3 billion yuan ($914.5 million), marking the smartphone maker's first quarterly profit decline since the fourth quarter of 2022. During a March 24 earnings call, company president Lu Weibing revealed the results, which still managed to beat the average analyst estimate of 5.7 billion yuan. The drop came despite fourth-quarter revenue holding steady at 116.9 billion yuan, highlighting the severe impact of rising component costs on the company's bottom line. The results reflect growing headwinds for consumer electronics firms operating in a market where China's overall smartphone sales fell 4% in the first part of 2026.

AI Boom Drives 'Immense Challenge' from Memory Costs

The primary driver of Xiaomi's margin compression is a global surge in memory chip prices, which Lu described as "faster and stronger than the company expected" and an "immense challenge to Xiaomi's operations." This price spike is directly linked to soaring demand from AI data center operators, which use the same high-performance memory. Market research firm Gartner forecasts the memory shortage will cause smartphone shipments to decline by 8.4% in 2026, while device prices could increase by 13%. Lu warned that if the cost pressure becomes unsustainable, Xiaomi would consider raising its product prices, a move that could erode its market share. He also predicted an industry-wide reshaping, suggesting that some competitors "may even be eliminated."

Apple Weaponizes Crisis with Budget iPhone Onslaught

Xiaomi's cost dilemma is compounded by an aggressive strategic pivot from its chief rival, Apple. The Cupertino-based giant is launching lower-cost devices, including a $599 iPhone 17e, choosing to absorb higher component costs to directly attack the mid-range Android market that Xiaomi dominates. This strategy turns the industry-wide component crisis into a competitive weapon. Analysts see this as a clear effort to squeeze rivals who lack Apple's deep pockets and supply chain control.

Apple is moving into attack mode. They see the memory crisis as an opportunity to gain share.

— Francisco Jeronimo, Vice President at IDC.

This places Xiaomi and other Android manufacturers in a difficult position: either absorb losses and sacrifice profitability or raise prices and risk ceding customers to Apple's increasingly competitive ecosystem.