Defining Xiaomi’s High-Price Pivot Amid a Profit Slump
Xiaomi’s current strategy is a push to raise its global smartphone average selling price while net profit falls sharply, showing a deliberate shift from volume-driven growth to a premium phone strategy aimed at improving smartphone profit margins in a tougher market. In the first quarter, Xiaomi’s net income dropped 57% year-on-year to 4.72 billion yuan (around USD 695 million, approx. RM3,198 million) as higher memory chip costs and weak smartphone demand weighed on results. Total revenue slipped 11% to 99.14 billion yuan, with smartphone revenue down 12.5% to 44.3 billion yuan on a 19% shipment decline to 33.8 million units. Against this backdrop, Xiaomi lifted its global smartphone average selling price by 8.2% year-on-year, signaling that protecting value per device now matters more than chasing unit share at any cost.
ASP Climbs 8.2% as Premium Phones Gain Share
Xiaomi average selling price trends highlight how aggressively the company is moving upmarket. According to Xiaomi’s Q1 disclosure, global smartphone ASP reached a record 1,310 yuan, up 8.2% year-on-year, even as shipments fell. TelecomTalk reports that this rise in ASP is “largely been due to a rise in demand for premium phones globally,” underlining that the mix shift is not accidental. Premium smartphones priced at or above 3,000 yuan made up 23.5% of total smartphone units sold in the Chinese mainland during the quarter, a sizable share for a brand once defined by budget devices. The launch of models such as the Xiaomi 17 Max expands its higher-end portfolio, offering more expensive standard and Pro options. Xiaomi is clearly using higher pricing and specification tiers to offset weak volumes and defend smartphone profit margins from rising memory chip costs.
Profit Pressure: Rising Memory Chip Costs and Margin Squeeze
The paradox in Xiaomi’s strategy is that smartphone profit margins are under strain even as device prices climb. Global memory prices have surged due to booming AI infrastructure demand, and Xiaomi’s smartphone gross margin fell from 12.4% a year ago to 10.1%. Higher memory chip costs are erasing some of the benefit of the higher ASP, while fierce competition keeps Xiaomi from fully passing costs to buyers. Net profit fell 57%, and adjusted net profit slid 43.1% year-on-year to 6.07 billion yuan, showing how fragile earnings now are. At the same time, Xiaomi’s IoT and lifestyle revenue dropped to 24.7 billion yuan, adding more pressure on group-level profitability. The company is effectively caught between component inflation and saturated smartphone demand, forcing it to seek value over volume even as short-term profits suffer.
From Volume Champion to Premium Contender
Xiaomi’s premium phone strategy marks a structural shift away from pure scale. The company still ranks among the top three global smartphone brands by shipments for the 23rd consecutive quarter, but units fell 19% year-on-year to 33.8 million. Rather than aggressively discounting to recover volume, Xiaomi is concentrating on higher-priced segments and a broader ecosystem. Its “Human × Car × Home” vision ties premium phones to AIoT devices and a fast-growing smart EV business that generated 19.9 billion yuan in revenue in the quarter. This suggests Xiaomi is positioning smartphones as a gateway to a higher-value hardware and services stack, rather than low-margin stand-alone products. The risk is that prolonged pressure on smartphone profit margins and memory chip costs could constrain investment, but the payoff could be a more resilient, premium-centric brand over time.