Xiaomi (1810.HK) warned on Friday that skyrocketing memory chip prices have significantly increased smartphone production costs, prompting the Chinese electronics maker to raise prices on its latest Redmi K90 series — and drawing a tepid response from consumers.
President Lu Weibing said in a post on Weibo that the surge in DRAM and NAND chip prices “far exceeded expectations” and was now “transferring cost pressure directly to product pricing.” Lu added that the situation could worsen in the months ahead as global chip demand accelerates, particularly from companies building AI data centers and high-performance computing systems.
The entry-level Redmi K90, featuring 12 GB of memory and 256 GB of storage, debuted at 2,599 yuan ($364) — slightly higher than the 2,499 yuan launch price of its predecessor, the K80, unveiled in late 2024. Xiaomi later announced a 300-yuan discount for the popular 12 GB + 512 GB variant, bringing its first-month price down to 2,899 yuan, in an effort to ease customer backlash.
The surge in chip prices is part of a broader global semiconductor squeeze, as manufacturers including Samsung Electronics (005930.KS) and SK Hynix (000660.KS) redirect supply toward AI-related demand. Analysts say this has led to a supply shortage of traditional memory chips used in smartphones, PCs, and servers, pushing up costs for consumer electronics makers like Xiaomi, Oppo, and Vivo.
Despite price adjustments, analysts believe Xiaomi will face margin pressure in the near term, particularly in its mid-range smartphone segment, which is most sensitive to cost fluctuations. The company is expected to focus more heavily on efficiency, localization of components, and long-term contracts with chip suppliers to mitigate volatility in 2025.
