Xiaomi (小米) transition: growth depends on cars, pressure lies with phones

Phones squeezed as memory prices surge

Xiaomi (小米) is racing to make its future in cars, and for good reason: it has been reported that escalating memory-chip costs are squeezing handset margins and forcing phone makers to choose between shrinking specs or hiking prices. At MWC 2026 Xiaomi President Lu Weibing warned that DRAM and NAND price inflation has put “huge pressure” on Xiaomi’s phone business, saying global memory quotations in Q1 were roughly four times year‑on‑year and predicting pain running into late 2027. The immediate result? Major Chinese and global brands have already raised retail prices or re‑speced models, and some smaller players have paused phone R&D entirely.

Why this is happening — AI demand and supply reallocation

The root cause is not a cyclical consumer-market wobble but a structural shift: AI data‑centre demand is gobbling up advanced memory and packaging capacity. Silicon Motion (慧荣科技) founder Gou Jiazhan has reportedly warned that 2026 will be “very painful” and that 2027 could be worse, as North American cloud and AI giants redirect DRAM, HBM and NAND supply to high‑end servers. It has been reported that DRAM and NAND prices reached decade highs by January 2026, with some segments up hundreds of percent, and that memory makers are prioritising high‑margin HBM and data‑centre customers over smartphones. That reallocation is geopolitical as well as commercial: deep pockets in US cloud and AI players are reshaping global supply flows, while major new fabs in Korea and the US are only scheduled to meaningfully add volume toward 2028.

Xiaomi’s car push is therefore both strategic and defensive. Can vehicle revenues offset handset pain quickly? Not in the short term. Cars are capital‑intensive and long‑tail; phones still deliver volume, brand presence and cash flow. But with memory making up an outsized share of BOM for mid‑ and low‑end phones — reportedly up to 30–40% in some segments — Xiaomi’s margin calculus has changed. Investors and consumers will be watching whether the company can hold smartphone pricing, preserve feature ladders, and accelerate automotive monetisation while the memory cycle runs its course.