Summary:
- Memory prices have surged by 80-90% in early 2026, severely impacting mobile phone manufacturers, particularly Xiaomi.
- The cost of memory chips is now a significant portion of the manufacturing budget, shrinking profit margins to around 10%.
- Xiaomi is proactively addressing these challenges through domestic supply agreements and increased use of local chip manufacturers.
Surge in Storage Prices Threatens Mobile Phone Profitability
In recent months, the skyrocketing prices of memory storage have intensified market pressures on mobile phone manufacturers, significantly affecting their profitability. This surge is particularly detrimental for brands like Xiaomi, which rely heavily on affordable components to maintain competitive pricing.
Recent reports indicate that memory prices have increased dramatically, with figures rising by 80-90% month-on-month in early 2026. Specifically, the cost of 64GB server memory has surged from $450 to over $900. This inflation is not limited to consumer electronics; it extends into multiple sectors, including the automobile industry, compounding supply chain challenges.
Xiaomi is facing unique pressures due to the overwhelming costs associated with memory components. A prominent industry analyst has pointed out that the role of memory chips in the Bill of Materials (BOM) has escalated sharply, now accounting for 20-30% of overall costs—up from a mere 10-15%. As a result, the gross profit margin for Xiaomi smartphones has dipped alarmingly close to the critical threshold of 10%, making it a challenging landscape, particularly for mid- to low-end models.
The impact of rising storage costs is not confined to smartphones. Xiaomi’s venture into electric vehicles is also in jeopardy, with projections indicating that the costs for high-end models like the SU7 could increase substantially by 1,000-3,000 yuan. This situation is compounded by statements from Lei Jun, the founder of Xiaomi, who has warned that the automotive sector may witness memory cost escalations in the thousands of yuan. Furthermore, the supply satisfaction rate for memory chips in the automotive industry is expected to remain below 50%, raising significant supply chain risks.
To combat this daunting challenge, Xiaomi’s senior executives have implemented several strategic measures. Lu Weibing, another key player in the company, has confirmed an advance storage supply agreement for 2026, aiming to secure a steady stream of necessary components. In addition, Xiaomi is focusing on local production by increasing procurement from domestic manufacturers like Yangtze River Storage and Changxin Storage. These partnerships could yield cost savings of 15-20% compared to international suppliers, creating a buffer against escalating prices.
In summary, the current landscape poses a dual challenge for smartphone and automotive manufacturers alike, especially for companies like Xiaomi, which are under continued pressure to innovate while managing costs. The unsettling rise in memory storage prices signifies a broader issue within the electronics supply chain, demanding urgent attention and resilient strategies.
In conclusion, as the mobile phone industry grapples with these turbulent conditions, the importance of adapting to evolving market dynamics and embracing domestic supply solutions has never been clearer. The coming months will be pivotal in determining how manufacturers navigate the pressures of increasing storage costs and maintain their competitive edge in an ever-evolving market landscape.
