Xiaomi launches flagship smartphone as memory price surge threatens sales

Xiaomi has officially launched its latest flagship smartphones globally, introducing the Xiaomi 17 and 17 Ultra. These devices are designed to compete directly with industry leaders like Samsung and Apple in the premium market segment. Despite facing a significant increase in memory chip prices, Xiaomi has opted to keep the prices of these new models consistent with last year's offerings. The Xiaomi 17 is priced starting at 999 euros (approximately $1,179), while the more advanced Xiaomi 17 Ultra begins at 1,499 euros. According to Counterpoint Research, memory prices have surged by 80% to 90% in the first quarter of the year due to a supply shortage, as chips are increasingly allocated to data centers supporting AI applications. This spike in costs poses a challenge for the smartphone industry, which could see prices rise by as much as 13% by 2026, as predicted by Gartner. The International Data Corporation (IDC) forecasts a decline of 12.9% in the smartphone market by 2026 as a direct consequence of the ongoing chip shortage. Analysts indicate that manufacturers focusing on higher-end devices may be better positioned to absorb these increased costs. However, for Xiaomi, which primarily generates revenue from mid-range smartphones, the looming price hikes could negatively impact demand. Francisco Jeronimo, IDC's vice president for data and analytics, highlighted that Xiaomi's limited presence in the premium market means it cannot rely on high-margin devices to offset losses in other categories, unlike competitors such as Apple and Samsung. In November, Xiaomi executives indicated that the industry might have to raise smartphone prices by 2026. Ben Wood, chief analyst at CCS Insight, speculated that Xiaomi may also need to increase the prices of its low-to-mid-tier devices to adapt to the changing market conditions. While smartphones remain a key revenue source, Xiaomi has been diversifying its business interests, with electric vehicles now accounting for about a quarter of its sales, providing a crucial revenue stream during the current memory crisis. The company's smartphone revenue saw a 3% year-on-year decline in the September quarter, according to its most recent financial reports, while electric vehicle sales surged nearly 200%.