Xiaomi Profits Plunge as Chip Shortages Hit Smartphone Shipments

Xiaomi reported a sharp decline in financial performance for the second quarter of 2026, with adjusted net income plunging 43% to 6.22 billion yuan. This marks the company's third consecutive profit decline. Total quarterly revenue fell 6.1% year-on-year to CNY 108.9 billion, while net profit decreased 20.3% to CNY 9.5 billion.

Xiaomi experienced a 26.5% year-on-year drop in smartphone shipments, falling to 31.2 million units. The company attributed this decline to a global memory chip shortage, as suppliers including Samsung Electronics Co. and SK Hynix Inc. prioritized AI-focused data center chips over conventional memory products. This shortage increased material costs and reduced demand for low-cost devices, though a record high average selling price of CNY 1,351 helped offset some losses.

Regional performance varied, with shipments dropping to 8.4 million units in Mainland China and the company falling to fourth place in India. Despite these losses, the company remains the world's third-largest smartphone maker. To diversify income, founder Lei Jun has pivoted the company toward the electric vehicle market. While the EV division reported losses this quarter, the company plans to begin selling vehicles overseas next year.

Additionally, the company is investing over CNY 40 billion annually in research and development, focusing on AI models and the beta version of HyperOS 4.