Why is Xiaomi doubling down on in-house chips amid a profit slump?

Chinese tech giant’s Xring O3 3nm AI processor scheduled to debut aboard folding smartphone in September

Xiaomi’s long-term push into proprietary silicon is laying the groundwork for complex artificial intelligence workloads on smartphones and cars, analysts say, as the Chinese tech giant doubles down on self-developed chips despite an earnings slump and soaring component costs.

On Monday it unveiled its flagship Xring O3 3-nanometre AI processor for smartphones, which is scheduled to debut in September aboard its Xiaomi 18 Fold smartphone.

The company has also introduced the Xring O100 – a 6nm AI accelerator designed to boost Xiaomi’s MiMo large language model when paired with the O3 – alongside a 3nm Xring D100 chip for autonomous driving. Xiaomi said both the O100 and D100 will be deployed commercially next year.

Ivan Lam, a senior analyst at Counterpoint Research, said Xiaomi’s semiconductor progress placed it in “the top tier of China’s self-developed mobile systems-on-a-chip (SoC)”.

“In the current age of AI, on-chip AI performance has become even more critical as AI workloads are becoming more complex,” Lam said, adding that while semiconductor investments yielded no immediate financial returns, Xiaomi’s long-term commitment remained positive.

Xiaomi’s chip expansion comes as the global smartphone industry grapples with surging memory and component costs, squeezing profit margins across handsets and electric vehicles.