Xiaomi’s Rising ASP Meets a Profit Slump
Xiaomi’s latest quarter shows how smartphone pricing trends can move in one direction while profits move in the opposite, as higher average selling prices collide with weaker demand and rising component costs. The company’s global smartphone average selling price (ASP) climbed 8.2% year-over-year to a record RMB1,310, but net income for the same period fell 57% to 4.72 billion yuan (around USD 695 million, approx. RM3,250). Total revenue slipped 11% to RMB99.1 billion, underlining how volume and cost pressures outweighed price gains. Smartphone revenue reached RMB44.3 billion on shipments of 33.8 million units, down 19% from a year earlier, which weighed on phone profit margins. This disconnect between Xiaomi’s higher ASP and lower earnings sets up a core question: can premium positioning offset the impact of expensive components and weak demand soon enough?
Premiumization Push: Fewer Phones, Higher Selling Prices
Xiaomi’s strategy centers on moving its portfolio upmarket, even as the market cools. According to Xiaomi Corporation’s latest results, revenue from the smartphone business reached RMB44.3 billion, with the premiumization strategy pushing global smartphone ASP up 8.2% year-over-year to RMB1,310, the highest in the company’s history. Third-party data cited by Xiaomi show that premium smartphones with a retail price at or above RMB3,000 made up 23.5% of its total smartphone units sold in its home market. TelecomTalk reports the same ASP increase in rupee terms, underscoring a broad move toward higher-priced models rather than a regional quirk. Flagship launches like the Xiaomi 17 Max expand the top end of the range, signalling that Xiaomi is willing to sacrifice some shipment volume if it can grow revenue per device and, eventually, phone profit margins.
When Memory Chip Costs Erase Pricing Gains
The sharp decline in profit shows how rising component prices can overpower carefully managed smartphone pricing trends. Xiaomi’s core smartphone business is under pressure as global memory prices surge, driven by booming AI infrastructure demand. The Tech Portal notes that smartphone gross margin fell from 12.4% a year ago to 10.1%, even though average selling prices increased slightly. Higher memory chip costs raised production expenses per device, while weak smartphone demand limited how far Xiaomi could push retail prices without hurting volumes further. Smartphone shipments dropped 19% year-on-year to 33.8 million units, the steepest decline among the world’s five largest brands. In effect, each phone sold brought in more revenue on average, but the extra income did not cover the added memory chip costs and lost scale, compressing overall phone profit margins.
Structural Improvements vs. Market Headwinds
Management highlights that structural indicators are improving, even as headline profit falls. Xiaomi reports that adjusted net profit reached RMB6.1 billion, exceeding market expectations, and that operating profit from its core smartphone × AIoT business grew nearly 200% quarter-over-quarter. IoT and lifestyle products delivered RMB24.7 billion in revenue with a 25.2% gross margin, while smart EV, AI and other new initiatives generated RMB19.9 billion in revenue, up 6.9% year-over-year. These areas help cushion volatility in phones, but they could not offset the near-term hit from rising memory chip costs and weaker smartphone demand. The combination of higher ASPs and better mix in IoT and vehicles shows Xiaomi is trying to build a higher-margin ecosystem, yet the Q1 2026 earnings still underline how exposed the group remains to core phone component inflation.
Can Xiaomi’s Premium Bet Pay Off?
The tension between Xiaomi’s rising ASP and falling profit underlines the limits of pricing power in a downcycle. On paper, shifting toward premium smartphones, higher-margin IoT devices, and smart EVs should gradually improve returns. In practice, the latest quarter shows that external shocks such as memory chip costs and weak demand can outweigh these efforts for now. For investors and industry watchers, Xiaomi has become a test case of how far a mass-market brand can push premium positioning without losing scale. If smartphone pricing trends stabilize and memory chip costs ease, Xiaomi’s higher ASP and richer product mix could translate into stronger phone profit margins. Until then, the company’s ability to keep lifting prices while protecting volumes will decide whether this premium strategy looks like foresight or a temporary strain on earnings.