Xiaomi flags major chip-cost pressures, expects retail prices to rise

BEIJING, China: Xiaomi is bracing consumers for more expensive smartphones next year, saying a global surge in memory chip prices is set to drive up production costs and squeeze margins across the industry. Speaking on an earnings call this week, Xiaomi President Lu Weibing said the company expects the cost pressures from memory chips to intensify in 2025 as demand for components used in artificial-intelligence servers accelerates. "I expect pressure to be much heavier next year than this year," Lu said. Memory chip prices have been climbing as tech giants race to build data centres, prompting chipmakers such as Samsung to shift capacity toward high-bandwidth memory (HBM) and scale back output of the chips used in consumer devices like smartphones. "Overall, consumers are likely to see a sizeable rise in product retail prices," Lu said. "Some of the pressure may have to be addressed through price hikes, but price increases alone won't be enough to digest it." Lu earlier acknowledged that higher memory prices had already pushed up smartphone costs, after some customers questioned the pricing of the company's newly launched Redmi K90. Xiaomi shipped 43.3 million smartphones in the third quarter, up 0.5 percent from a year earlier, maintaining its position as the world's third-largest phone maker with a 13.6 percent market share, according to data from Omdia. For the quarter ended September, Xiaomi reported total revenue of 113.1 billion yuan (US$16 billion), a 22.3 percent increase that came in slightly below the average analyst estimate of 116.5 billion yuan compiled by LSEG. Hong Kong-listed shares fell 2.81 percent on November 18, but remain up 18.2 percent for the year. The company said growth was supported by its electric-vehicle, AI, and other new businesses, which together accounted for 25 percent of total revenue. Adjusted net profit surged 80.9 percent year-on-year to 11.3 billion yuan, beating the 10.3 billion yuan expected by analysts. Xiaomi, which has expanded aggressively into the electric-vehicle market, reported 28.3 billion yuan in EV revenue for the September quarter, up from 20.6 billion yuan in Q2 and 18.1 billion yuan in Q1. The company said its EV, AI, and new-initiative divisions generated an operating profit of 700 million yuan in Q3, their first profitable quarter. The company delivered 108,796 EVs in the period, boosted in part by the rollout of its second model, the YU7 electric SUV, launched in June. Deliveries were up from 81,300 in the second quarter, which did not include YU7 sales.