Xiaomi warns of handset cost pressure as AI chip boom drives up memory prices

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Chinese smartphone maker Xiaomi Corp has said that surging memory chip prices have raised handset production costs, after market disappointment over the pricing of its newly launched Redmi K90 series.

"Cost pressure has transferred to the pricing of our new products," the firm's president, Lu Weibing, wrote on Weibo, adding that the rise in memory chip prices was "far beyond expectations and could intensify."

Xiaomi unveiled the Redmi K90 on Thursday, pricing the base version — with 12 GB of memory and 256 GB of storage — at 2,599 yuan ($364), up from 2,499 yuan for the entry K80 model launched in November 2024.

Following consumer criticism over pricing gaps between models, Lu said Xiaomi will cut the price of the most popular variant — with 12 GB memory and 512 GB storage — by 300 yuan, to 2,899 yuan, for the first month of sales.

A global boom in demand for advanced chips used in artificial intelligence (AI) systems — such as high-bandwidth memory (HBM) and GPUs that power large language models — has tightened semiconductor supply chains. 

While AI chips are designed for heavy parallel computing and data processing, smartphones rely on conventional DRAM and NAND flash chips for memory and storage.

As foundries and suppliers divert capacity toward high-margin AI components, the supply of standard memory chips has shrunk, driving up prices for smartphone and PC makers worldwide.