Xiaomi, China's largest smartphone manufacturer, reported a 43% year-on-year drop in net quarterly income, attributing the sharp decline to rising memory chip prices and weakening global demand for smartphones [1]. The company’s management cited that the ongoing memory chip shortage has significantly increased production costs, squeezing already thin handset margins. Additionally, Xiaomi’s expansion into the electric vehicle (EV) sector has deepened capital strain, further pressuring overall profitability [1].
The impact of rising memory chip prices is not limited to Xiaomi’s home market. In India, the world’s second-largest smartphone market by volume, the average selling price of smartphones reached a record $315, up 14.4% from a year earlier [2]. Chinese smartphone brands, which dominate the sub-$150 segment, are struggling to maintain affordability as memory costs surge. According to Counterpoint Research, new Chinese phone models in India could be priced between $200 and $250, compared to under $150 previously, with prices in the sub-$150 category already rising by up to 40% [2].
Market data from IDC shows that smartphone shipments in India fell 7.9% year-on-year in the first half of 2026, dropping to 64.2 million units, with the entry-level tier experiencing a steep decline [2]. Despite the fall in volume, the market’s value grew 3.6% due to higher average selling prices. Chinese brands, including Xiaomi, saw significant shipment declines in the June quarter: Vivo fell 13.9%, Oppo 8.5%, Xiaomi 10%, and Realme 14.2% from a year ago [2]. Meanwhile, premium brands like Apple and Samsung gained market share as consumers shifted toward higher-priced models, aided by improved financing options [2].
Xiaomi’s management and market sentiment remain cautious, with persistent supply chain and demand challenges clouding the outlook [1]. Experts suggest that the era of sub-$150 smartphones may be ending in India, as rising component costs force Chinese brands to raise prices, eroding their traditional value-for-money advantage [2].
CONCLUSION
Xiaomi’s sharp profit decline and falling shipments underscore the severe impact of rising memory chip costs and weak demand on Chinese smartphone makers. As affordability erodes, premium brands like Apple and Samsung are gaining ground, especially in key markets like India. The outlook remains cautious, with ongoing supply chain pressures and shifting consumer preferences likely to continue weighing on Chinese smartphone companies.