Xiaomi Shares Fall After Rising Memory Costs Hurt Q1 Earnings
Xiaomi shares moved lower on Wednesday after the Chinese technology company reported weaker-than-expected first-quarter results, pressured by rising component costs and increased competition in its smartphone business.
The stock declined nearly 3% to HK$28.88, marking its lowest level in almost a month. Xiaomi was also among the largest contributors to losses on the Hang Seng Index, which fell 0.9% during the session.
Xiaomi Profit Drops 43% in the First Quarter
Xiaomi reported a sharp decline in profitability for the first quarter, with net profit falling 43% year-over-year to 6.1 billion yuan (approximately $899 million).
The main factor behind weaker earnings was the increase in memory chip costs, which significantly impacted Xiaomi’s core smartphone segment. Rising semiconductor expenses continue to pressure technology manufacturers globally, especially as artificial intelligence demand increases competition for chip supplies.
Smartphone Competition Intensifies in China
Beyond higher production costs, Xiaomi also faced stronger competition in the domestic market.
Major rivals including Apple Inc and Huawei continued competing aggressively for smartphone market share in China, adding further pressure on Xiaomi’s core business.
The challenging environment highlights the increasing difficulty for smartphone manufacturers to maintain margins while competing on pricing, innovation, and hardware performance.
Electric Vehicle Growth Continues, but Profitability Remains Limited
Xiaomi’s electric vehicle division delivered strong sales growth during the quarter. However, heavy investments and relatively low profit margins in the EV business reduced the positive impact on overall company earnings.
The company has been increasing spending on electric vehicles and artificial intelligence as part of a broader strategy to reduce dependence on consumer electronics.
These investments reflect Xiaomi’s long-term goal of building new growth engines outside its traditional smartphone ecosystem.
Xiaomi Looks Overseas as Costs Keep Rising
To offset increasing competition and higher production costs in China, Xiaomi announced plans to continue expanding into international markets.
The company also indicated that relief from rising memory chip costs may remain limited, largely due to strong global demand driven by artificial intelligence development.
As AI adoption accelerates, competition for advanced semiconductors could continue affecting profit margins across the technology sector.
The latest earnings report suggests Xiaomi faces a difficult balance between maintaining growth through EVs and AI investments while protecting profitability in its core smartphone business.
