Xiaomi Falters, While Apple and Huawei Rise?

Escalating costs are reshaping the competitive landscape of the mobile phone market.

Recently, research firm Omdia unveiled its Q1 global smartphone market rankings. Apple shipped 60.4 million units, marking a 10% year-over-year (YoY) increase. Huawei, although not among the global top five, witnessed growth in the Chinese mainland market.

In contrast, OPPO, Vivo, Honor, and Xiaomi all experienced declines. OPPO (inclusive of Realme and OnePlus) shipped 30.7 million units, a 6% YoY decrease. Vivo's shipments stood at 21.3 million units, down 7% YoY. Honor saw growth overseas but a decline in the Chinese mainland market.

Among the major contenders, Xiaomi faced the steepest decline, with domestic shipments of merely 8.7 million units, a 35% YoY drop, ranking fifth in China.

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

Xiaomi is not the sole brand raising prices this year. So, why is it bearing the brunt? With its "cost-effectiveness" advantage diminished by rising costs, how can smartphone brands safeguard their market positions?

01. Xiaomi Falters, Apple and Huawei Gain Momentum?

"We understand why our competitors are raising prices. It's a challenging time for everyone, and we're also feeling the pressure," remarked a Xiaomi executive.

"We're striving to minimize the impact of price hikes on consumers," they added.

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

Qujie Business observed that since memory price hikes, most Chinese brands have significantly raised prices, except Huawei and Apple. OPPO's Find X9 flagship series saw a price increase of around ¥500. Honor's new Magic V6, available in 16GB+512GB and 16GB+1TB variants, is ¥1,000 more expensive than its predecessor.

While Xiaomi's price hikes are not the most substantial, their impact is the greatest due to the brand's positioning. Over 50% of Xiaomi's shipments are in the sub-$200 segment, catering to price-sensitive consumers. Even a ¥200 increase can tarnish its reputation for "cost-effectiveness." In April, the Redmi Turbo 5/5 Max, delayed by 15 months, launched with a ¥300 price hike. RD data indicates that Turbo 5 series sales were just 60% of Turbo 4's during the initial period.

Compounding the issue, memory chip prices continue to soar. SemiAnalysis reports that LPDDR5 mobile memory prices have tripled since Q1 2025, now hovering around $10/GB, with double-digit growth expected by 2027.

Memory is an indispensable component of smartphones, accounting for 10-15% of costs across all price tiers. With prices on the rise, memory now represents 30-40% of costs in low- to mid-end models.

Liang Zhenpeng, a senior industry observer, noted that Redmi, Xiaomi's budget brand, operates on thin profit margins—some models earn less than ¥100 per unit. Unable to absorb the doubling of memory costs, Xiaomi must raise prices or incur losses. The brand is consciously reducing low-end shipments and slowing new product launches. The Q1 sales and market share decline may just be the tip of the iceberg.

Phone retailers report that models priced below ¥4,000, especially those with 12GB+512GB configurations, are increasingly challenging to sell. OPPO and Vivo, which focus on mid-range models, have also been affected, with global shipments declining, though they've maintained stability in China.

Industry insiders estimate that Xiaomi's lost market share has gone to Huawei and Apple—the only brands this year that haven't raised prices, with some models even seeing price cuts.

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

Huawei's flagship models have also avoided price hikes, with some offering discounts. Its cost advantage and domestic supply chain enable it to gain market share through competitive pricing.

Apple, too, sees the memory price surge as a market opportunity. With hardware gross margins of 35-40%, it can absorb memory cost increases. The iPhone 17 is priced the same as its predecessor, while the iPhone 17e and iPhone Air have seen price drops of ¥1,000-2,000 on e-commerce platforms. Combined with a low base in Q1 last year, Apple's sales growth in China has been significant, with mainland China shipments reaching 13.1 million units, up 42% YoY.

02. Beyond Price Hikes: Exploring Alternatives

In addition to pricing pressures, Xiaomi's market share decline is also linked to its shifting strategic focus.

With stagnant growth in the overall smartphone market and pressure on the low-end segment, Xiaomi is pivoting towards smart cars, major appliances, and other new ventures.

Over the past two years, smartphones' contribution to Xiaomi's revenue has steadily declined. In 2025, smartphone revenue was ¥186.4 billion, accounting for 40.8% of total revenue, down from 52.4% in 2024.

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

Xiaomi's offline channel adjustments also reflect its rebalanced business strategy.

In November 2025, Xiaomi announced a restructuring of its Mi Home stores, closing underperforming and loss-making outlets while enhancing efficiency. Mi Home staff report that the sales focus has shifted from smartphones to major appliances, with new KPIs for appliance sales, now accounting for over 20% of store performance metrics.

Xiaomi has long aspired to dominate the major appliance sector. Lu Weibing, Xiaomi Group President, has repeatedly stated, "In the next five years, Xiaomi aims to become China's top major appliance brand, achieving ¥100 billion in appliance revenue, with air conditioners ranking among the top two in China."

However, traditional giants like Haier, Midea, and Gree already dominate market channels and consumer mindshare, making it difficult for Xiaomi to break through. A report from "Xiaofeibao," a consumer complaint platform under the China Electronics Chamber, showed that in the first three quarters of 2025, Xiaomi accounted for 46.63% of appliance complaints in some metrics, comparable to the combined complaints of Gree and Midea.

Shan Lianyu, General Manager of Xiaomi's Major Appliance Division, stated at an internal meeting that in 2026, Xiaomi aims to change consumer perceptions of its appliance quality.

Xiaomi entered the appliance market through contract manufacturing and is now building its own factories, but supply chain development takes time.

Meanwhile, traditional giants like Midea are obstructing 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.

OPPO, Vivo, and Honor are also exploring strategies to counter pricing pressures.

OPPO recently integrated OnePlus and Realme, merging Realme's R&D team into the group to consolidate 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 innovative 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 phone brands can withstand cost pressures remains to be seen.

Zhong Xiaolei, a senior analyst at Omdia, believes that breakthroughs in AI capabilities will be crucial for phone makers to break through. Brands that offer unique and practical AI agent features can enhance their brand image and establish new competitive moats.

Both memory price fluctuations and AI advancements are introducing uncertainties into China's smartphone market. The industry is poised for a reshuffle driven by rising costs and technological innovation. Xiaomi's ability to achieve breakthroughs in its core smartphone business amid diversification will determine its future standing in the industry.