Xiaomi Holds Line on Flagship Pricing as Memory Chip Costs Surge 90%

Xiaomi Holds Line on Flagship Pricing as Memory Chip Costs Surge 90%

Xiaomi launched its latest flagship smartphones on Saturday with unchanged pricing despite an unprecedented 80-90% surge in memory chip costs during the first quarter, a gambit that could squeeze margins as the Chinese manufacturer battles Apple and Samsung for high-end market share.

The Xiaomi 17 starts at 999 euros ($1,179) while the premium 17 Ultra is priced at 1,499 euros—identical to last year's models—even as the memory components inside them have become dramatically more expensive. For CFOs watching the consumer electronics space, it's a textbook case of eating cost inflation rather than passing it through, and the question is how long that's sustainable.

The memory crunch stems from a supply squeeze, with chip production being redirected toward data centers hungry for AI infrastructure. Memory is among the most expensive components in a smartphone, and Counterpoint Research pegs the first-quarter price jump at 80-90%. Gartner forecast in February that smartphone prices overall could rise 13% in 2026, which makes Xiaomi's pricing hold particularly aggressive—or risky, depending on your view of their margin structure.

Xiaomi is the world's third-largest smartphone maker, and these devices represent its premium tier, the segment where it's trying to prove it belongs in the same conversation as the iPhone and Galaxy lineups. Holding pricing steady is a statement: we're not going to let component costs push us out of this fight. But it's also a bet that volume and brand momentum matter more right now than protecting gross margin on each unit.

The launch took place at Mobile World Congress in Barcelona, the industry's annual showcase, where every major player is trying to signal confidence. What Xiaomi is signaling here is that it's willing to absorb short-term pain to defend its position. The alternative—raising prices into a market where Gartner already expects 13% increases—would risk losing the traction it's spent years building in premium segments outside China.

The memory shortage is the kind of supply chain disruption that makes finance teams nervous because it's both unpredictable and structural. AI's appetite for chips isn't a temporary spike; it's a reallocation of manufacturing capacity that could persist. Smartphone makers are now competing with cloud providers and AI labs for the same DRAM and NAND supply, and those buyers have deeper pockets and less price sensitivity.

For Xiaomi, the math is straightforward but uncomfortable: if memory costs stay elevated and they've locked in pricing for this product cycle, something else has to give. That could mean lower marketing spend, tighter operational efficiency, or simply accepting compressed margins as the cost of staying competitive. The company hasn't disclosed its margin expectations for these devices, but the gap between component inflation and pricing discipline will show up in quarterly results soon enough.

The broader question for the industry is whether this is the beginning of a sustained margin squeeze across consumer hardware. If memory prices stay high and other manufacturers follow Xiaomi's lead on pricing, the sector could be looking at a prolonged period of profitability pressure—unless demand proves strong enough to justify eventual price increases that the market will actually bear.