Xiaomi Faces Rising Costs Amid Memory Chip Shortage

The company adjusts Redmi K90 pricing as global demand for AI chips drives up component costs.

Chinese electronics firm Xiaomi has acknowledged that rising memory chip prices are affecting smartphone production costs, following mixed reactions to the pricing of its newly launched Redmi K90 series. Company president Lu Weibing addressed the issue on Weibo, noting that cost pressures have directly influenced the retail pricing of new models. The base version of the K90, featuring 12 GB of RAM and 256 GB of storage, launched at 2,599 yuan (approximately 364 US dollars). This marks a modest increase from the 2,499 yuan starting price of the previous K80 series introduced in late 2024.

Pricing Strategy and Consumer Response

Lu acknowledged that consumers expressed dissatisfaction with the pricing differences between various K90 configurations. In response, Xiaomi has decided to reduce the price of the most popular K90 variant—equipped with 12 GB RAM and 512 GB storage—by 300 yuan for the first month of sales. The adjusted price of 2,899 yuan is intended to ease concerns and stimulate early demand. While the company did not revise the base model’s price, the move signals a willingness to adapt to market feedback.

The pricing challenge comes at a time when global chip supply chains are under strain. A surge in demand for memory components used in artificial intelligence applications has limited availability for more traditional uses like smartphones and PCs. This supply pressure has led to higher costs for NAND and DRAM chips, which are essential for mobile devices. Manufacturers such as Samsung Electronics and SK Hynix have seen increased earnings as a result of the constrained supply.

Broader Market Implications

Xiaomi’s situation reflects a wider trend in the consumer electronics industry, where component shortages are reshaping pricing strategies. Companies are being forced to balance profitability with consumer expectations in a volatile supply environment. The memory chip market, in particular, has become increasingly sensitive to shifts in demand from emerging technologies. As AI accelerates, traditional device makers may face continued cost volatility unless supply stabilizes.

The Redmi K90’s launch illustrates how even incremental price changes can influence consumer sentiment. Xiaomi’s decision to adjust pricing early in the product cycle suggests a proactive approach to maintaining competitiveness. Other smartphone makers may face similar dilemmas as they navigate fluctuating component costs. The situation underscores the interconnectedness of global tech supply chains and the ripple effects of AI-driven demand.