Lei Jun’s test isn’t over yet

Strong headline numbers, softer reality underneath

Xiaomi (小米) posted a glossy 2025 scorecard — revenue up 25% year‑on‑year and adjusted net profit hitting a record 39.2 billion yuan (392亿元). Mobile gross margin held at 10.9%. Leadership, led by Lei Jun (雷军) and Lu Weibing (卢伟冰), presented the results as proof that Xiaomi’s push into higher‑end phones, cars, home appliances and AI services has kicked off a new growth wave. But the key question isn’t how good the headline numbers look. It’s how durable they are as upstream memory and semiconductor prices climb.

Buffering via inventories and payables

Beneath the surface, Xiaomi has materially increased its raw‑material stocks and stretched trade payables — classic cycle‑hedging moves. Raw‑material inventory rose to 23.97 billion yuan (239.7亿元), up 67.4% from a year earlier, while trade payables aged under three months jumped from about 68.06 billion yuan (680.6亿元) to roughly 93.54 billion yuan (935.4亿元). Fourth‑quarter operating profit already slipped nearly 30% to 6.229 billion yuan (62.29亿元). It has been reported that Lei Jun once argued Xiaomi’s chip sourcing was an advantage — reportedly calling the company the world’s sixth‑largest chip buyer — which would help explain why Xiaomi could front‑load procurement. But the company hasn’t disclosed the precise make‑up of the added inventory, so observers can’t confirm how much is memory versus other components.

Market context and the limits of smoothing

The industry backdrop matters. Western export controls and the global rush to AI infrastructure have pushed much memory capacity into data‑centre channels, tightening supply for phones, IoT and PCs and lifting prices. Other Chinese handset makers — OPPO (欧珀), vivo (vivo/维沃), Honor (荣耀) — and even Samsung have begun passing costs to consumers with price adjustments across mainstream lines. That leaves vendors with three choices: force price increases onto buyers, keep buying ahead and hope inventories cover the gap, or accept margin erosion to retain share. Xiaomi looks to have leaned on the middle option — and perhaps some of the third — buying time with supply‑chain muscle. But old inventory runs out and payables must be settled. It has been reported that some analysts expect memory‑driven pressure to show up more clearly in 2026.

The test for Lei Jun: can consumers pay more?

The real test for Lei Jun is whether Xiaomi can translate its “high‑end” narrative into genuine pricing power. Xiaomi defines 3,000 yuan and up as high end, and that segment’s share rose to a record. Yet average selling price barely moved. If most volumes still come from low‑end models, inventory buffering only postpones pain. Xiaomi may be better prepared than many rivals — deeper pockets, stronger procurement — but buffering is not a cure. In a market where component costs are being reshaped by geopolitics and AI demand, can Xiaomi convince consumers to pay more before the next inventories run dry? If not, this quarter’s stability will look like a temporary reprieve rather than a durable victory.