Xiaomi Falters, While Apple and Huawei Gain Momentum?

Rising costs are transforming the smartphone market landscape.

Recently, research firm Omdia unveiled its ranking of global smartphone vendors in key markets for the first quarter of this year. Apple led with 60.4 million units shipped in Q1, marking a 10% year-on-year increase. Huawei, though absent from the global top five, demonstrated year-on-year growth in the Chinese mainland market.

Contrasting with Apple and Huawei's upward trajectories, OPPO, Vivo, Honor, and Xiaomi all experienced declines. OPPO (including realme and OnePlus) shipped 30.7 million units globally, a 6% year-on-year decrease. Vivo's global shipments dropped 7% to 21.3 million units. Honor saw growth overseas but a decline in mainland China sales compared to the previous year.

Among the major smartphone players, Xiaomi suffered the most significant downturn: its domestic shipments in Q1 plummeted to 8.7 million units, a 35% year-on-year decrease, ranking fifth in China.

According to IDC's statistical methodology, Huawei, Apple, OPPO, Vivo, and Honor secured the top five positions in the Chinese market in Q1, with Xiaomi falling into the "Others" category—its worst quarterly ranking in China in nearly a decade.

This year, Xiaomi is not alone in raising prices. Why, then, has it been hit the hardest? With its "cost-effectiveness" reputation undermined by escalating costs, how can smartphone brands defend their market positions?

01. Xiaomi Falters, Apple and Huawei Gain Momentum?

"We understand why competitors are raising prices. Everyone is struggling, and we're feeling the pain too."

"We'll strive to minimize the impact of price hikes on consumers."

...

From Lu Weibing to Lei Jun, Xiaomi's executives have repeatedly addressed pricing pressures this year.

Qujie Business observed that since memory price hikes, most domestic brands, except Huawei and Apple, have significantly raised prices. OPPO's flagship Find X9 series saw an increase of around RMB 500. Honor's newly released Magic V6 witnessed a RMB 1,000 price hike for its 16GB+512GB and 16GB+1TB versions compared to the previous generation.

While Xiaomi's price increases were not the most substantial among domestic brands, it was most severely affected by the trend. This is primarily due to Xiaomi's brand image: over 50% of its shipments are in the sub-$200 low-end segment, attracting price-sensitive consumers. Even a RMB 200 increase can tarnish its reputation for "cost-effectiveness." In April, the Redmi Turbo 5/5 Max, released 15 months after its predecessor, saw a RMB 300 price hike. RD data indicates that Turbo 5 series sales during its initial period were just 60% of Turbo 4's.

To compound the issue, memory chip prices continue to soar. SemiAnalysis data reveals that mobile LPDDR5 memory has tripled since Q1 2025, now costing approximately $10/GB, with double-digit growth expected by 2027.

Memory is essential for smartphones, accounting for 10-15% of costs across all price tiers. After price hikes, memory now represents 30-40% of costs in some low-to-mid-end models.

Liang Zhenpeng, a senior industry observer, noted that Xiaomi's low-to-mid-end Redmi brand has thin profit margins—some models earn less than RMB 100 per unit. Unable to absorb doubled memory/storage costs, Xiaomi would incur losses on every unit sold without price hikes. The brand is consciously reducing low-end shipments and slowing new product launches this year. The Q1 sales and market share decline may just be the beginning.

Channel partners report that models priced under RMB 4,000, especially those with 12GB+512GB configurations, are increasingly difficult to sell. OPPO and Vivo, which focus on mid-range models, also saw global shipment declines but managed to maintain their domestic market positions.

Industry insiders estimate that Xiaomi's lost shipments were captured by Huawei and Apple—the only brands this year that did not raise prices and even offered discounts on some models.

Price hikes have pushed many low-end models into the mid-range category. Huawei's "Enjoy" series targets Xiaomi and OV's sub-RMB 1,000 market. The March-released Enjoy 90 series, priced from RMB 1,299 and featuring a Kirin 8-series chip, HarmonyOS 6, and a large battery, attracted many users of Xiaomi's Redmi, OPPO's A series, and Vivo's Y series.

Huawei's flagship models also avoided price hikes, with some offering discounts. Combined with its domestic supply chain, Huawei is one of the few brands able to "trade price for volume."

Apple, like Huawei, views memory price surges as a market opportunity. With hardware gross margins of 35-40%, Apple can absorb memory cost increases. The iPhone 17 maintained last year's pricing, while the iPhone 17e and iPhone Air saw price drops of RMB 1,000-2,000 on e-commerce platforms. Coupled with a low base in Q1 last year, Apple's sales surged, with mainland China shipments reaching 13.1 million units, a 42% year-on-year increase.

02. Beyond Price Hikes: What Are the Alternatives?

Xiaomi's market share decline also stems from shifting business priorities amid a stagnant smartphone market and pressure on the low-end segment. The brand is increasingly focusing on smart electric vehicles (EVs), major appliances, and other new ventures.

Over the past two years, smartphone revenue's share of Xiaomi's total income has declined annually. In 2025, smartphone revenue was RMB 186.4 billion, accounting for 40.8% of total revenue, down from 52.4% in 2024.

Xiaomi's financials show that in 2025, revenue from smart EVs, AI, and other innovations reached RMB 106.1 billion, rising from 9% to 23.2% of total revenue. IoT and consumer product revenue grew 18.3% to RMB 123.2 billion, with gross margins improving to 23.1%.

Adjustments to offline channels also reflect Xiaomi's rebalanced business strategy.

In November 2025, Xiaomi announced a restructuring of its Mi Home stores, closing inefficient and unprofitable locations while enhancing efficiency. Mi Home staff noted that sales focus has shifted from smartphones to major appliances, with new KPIs for appliance sales—now accounting for over 20% of store performance metrics, alongside high-end smartphone targets.

Xiaomi has long aspired to dominate the major appliance sector. Lu Weibing, Xiaomi Group president, has publicly stated, "In the next five years, Xiaomi aims to become China's top major appliance brand, scaling the business to RMB 100 billion, with air conditioners ranking among China's top two."

However, traditional giants like Haier, Midea, and Gree already dominate market channels and user loyalty, making breakthroughs challenging for Xiaomi. A Consumer Protection report from the China Electronics Chamber revealed that in the first three quarters of 2025, Xiaomi accounted for 46.63% of appliance complaints in some categories, rivaling the combined complaints of Gree and Midea.

Shan Lianyu, general manager of Xiaomi's Major Appliance Division, stated at an internal meeting that the division aims to overturn the perception of poor product quality by 2026.

Xiaomi entered the appliance market via contract manufacturing and is now building its own factories, but supply chain development takes time. Meanwhile, traditional giants like Midea are hindering Xiaomi by prohibiting their service providers from collaborating with other brands. Whether Xiaomi's major appliance business can sustain growth and offset declining smartphone revenue remains uncertain.

Beyond Xiaomi, OPPO, Vivo, and Honor are also exploring strategies to counter pricing pressures. OPPO recently deepened the integration of OnePlus and realme, merging realme's R&D team into the group to centralize core resources like imaging and hardware, reducing internal competition to offset cost pressures. Vivo is consolidating its high-end market with imaging flagships like the X300 Ultra while adjusting prices in stages and controlling mid-range costs, betting on on-device AI and sensing technologies to differentiate and mitigate price hikes. Honor is experimenting with form factors, such as its Robot Phone, which integrates a mechanical gimbal into the body for a unique photography experience.

This pricing surge is expected to persist until at least 2027. Whether smartphone brands can withstand cost pressures remains to be seen.

Zhong Xiaolei, a senior analyst at Omdia, believes that breakthroughs in AI functionality will be crucial for smartphone vendors to break through. Brands that deliver distinctive and practical AI agent features can enhance their brand image while establishing new strategic advantages.

Fluctuations in memory prices and AI advancements are injecting uncertainty into China's smartphone market. The entire industry faces a dual squeeze from rising costs and technological evolution, prompting a new wave of restructuring. For diversified Xiaomi, breakthroughs in its core smartphone business will determine its fate in the industry shakeout.