A global memory shortage is squeezing major smartphone manufacturers as chipmakers shift production to high-margin AI server chips. Xiaomi's Q2 2026 adjusted net income fell 43% to 6.22 billion yuan, driven by a drop in smartphone gross margins to 8.5%. Meanwhile, Samsung Electronics' mobile unit posted a 700 billion won operating loss after its external memory procurement prices surged 211% compared to the 2025 average. Despite the strain, Xiaomi shares have rallied 20% on recovery hopes.
Xiaomi Q2 2026 profit decline
- ▪Xiaomi's second-quarter 2026 revenue fell 6.1 percent from a year earlier to 108.9 billion yuan ($16.2 billion), missing analyst forecasts of 112.2 billion yuan.
- ▪Xiaomi's adjusted net income for the second quarter of 2026 fell by approximately 43 percent to 6.22 billion yuan ($922 million), missing analyst forecasts of 6.6 billion yuan.
Memory chip price surge
- ▪Samsung Electronics' Device Solutions division average selling price for memory in the first half of 2026 was about 220 percent higher than the 2025 annual average.
- ▪The average price Samsung Electronics' Device eXperience division paid for externally sourced mobile memory in the first half of 2026 rose approximately 211 percent from the 2025 annual average.
Smartphone margin compression
- ▪Xiaomi's smartphone shipments fell 26 percent to 31.2 million units in the second quarter of 2026, representing the steepest shipment drop among the world's five largest phone makers.
- ▪Xiaomi's smartphone gross margin narrowed to 8.5 percent in the second quarter of 2026, down from 11.5 percent a year earlier, as handset revenue fell 7.5 percent to 42.1 billion yuan.
Samsung memory procurement costs
- ▪Samsung Electronics' MX and Networks division, which includes its smartphone business, posted an operating loss of about 700 billion won in the second quarter of 2026 due to rising component costs.
- ▪Samsung Electronics' external purchases of mobile memory totaled 5.04 trillion won ($3.6 billion) in the first half of 2026, with second-quarter purchases rising 53 percent to 3.05 trillion won.
Memory supply shift to AI
- ▪Memory suppliers including Samsung Electronics and SK Hynix have shifted production capacity toward advanced chips for AI data centers, squeezing the supply of conventional mobile memory.
- ▪Apple has started testing Chinese memory chips from CXMT to secure its own supply chain amid the global conventional memory shortage.
Recovery outlook expectations
- ▪Xiaomi President William Lu stated that the pace of memory price increases has started to slow and should continue to decelerate in the second half of 2026.
- ▪Xiaomi shares have risen nearly 20 percent in Hong Kong since the end of June 2026 as investors anticipate the company will get material costs under control.
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