Xiaomi said on Friday that it had no choice but to raise smartphone prices after a brutal spike in memory chip costs drove production expenses way beyond what the company expected.
The announcement came a day after the Chinese tech giant unveiled its new Redmi K90 series in Beijing, which was immediately hit with backlash over pricing.
The entry-level K90, fitted with 12GB RAM and 256GB of storage, was launched at 2,599 yuan ($364), up from the 2,499 yuan base price of the previous Redmi K80, which dropped in November 2024.
The company’s president Lu Weibing responded to the outrage directly on Weibo, saying, “Cost pressure has transferred to the pricing of our new products” and warned that “rising costs of memory chips are far beyond expectations and could intensify.”
The memory chip market is currently under siege thanks to AI-related demand, and smartphone brands are feeling the squeeze.
The gap between K90 configurations added more fuel. Buyers were frustrated by the steep jump between storage options, and Xiaomi knew it had to act fast.
Lu confirmed that the company would cut the price of the 12GB RAM / 512GB storage model (reportedly the most popular option) by 300 yuan, bringing it to 2,899 yuan, but only for the first month of sales.
Xiaomi faces fallout as AI boom drives chip prices through the roof
There’s a global memory chip shortage, and AI is the culprit. As new AI systems explode in demand across servers, cloud services, and high-performance hardware, prices for NAND and DRAM, the very chips used in phones and PCs, have surged.
Major players like Samsung Electronics and SK Hynix are now shifting focus to AI-optimized memory, pulling supply away from traditional devices. That’s left companies like Xiaomi scrambling.
The effects are clear: production costs are rising, prices are going up, and customers are pissed. Lu made it clear that Xiaomi didn’t plan for this scale of a cost hike. But now, even basic models are affected. And with AI continuing to eat up chip capacity, there’s no sign of relief ahead.
While companies fight rising chip prices, Beijing is busy rewriting its tech and manufacturing game plan. On Thursday, the same day the K90 was launched, China’s Communist Party released a 5,000-word blueprint outlining the next five-year economic strategy, fresh out of a four-day high-level meeting in Beijing.
The document landed just before a scheduled meeting between Chinese President Xi Jinping and U.S. President Donald Trump. Both countries remain locked in tense tech and trade negotiations.
The plan itself is a throwback to old-school Soviet-style central planning. China still depends heavily on these five-year cycles to decide where money goes and which industries matter.
The new blueprint says manufacturing will stay a national priority, even with overcapacity and cutthroat pricing plaguing some sectors. Leah from Capital Economics summed it up: “Manufacturing will remain a top priority.”
China now makes up 30% of all global manufacturing and roughly a quarter of global GDP, but the shift is clearly toward high-end production. Robin Xing, chief China economist at Morgan Stanley, said the next phase is about electric vehicles, robotics, and battery tech.
More importantly, Zheng Shanjie, the guy running the National Development and Reform Commission, laid out China’s full tech wish list: quantum computing, hydrogen energy, bio-manufacturing, next-gen mobile networks, and AI.
“These industries are ready to take off,” Zheng said. “It means that in the next 10 years we will build another high tech industry in China and this will inject continued impetus to our efforts to achieve Chinese modernization.”
He also made clear that China’s long game is building a powerful domestic market. “The economies of major countries are all driven by domestic demand and the market is the most scarce resource in today’s world,” Zheng said.
Whether this strategy actually shifts China away from its heavy reliance on exports is up in the air. But what’s not in doubt is China’s grip on global supply chains. It controls rare earths, the critical materials used in everything from phones to EVs to military tech.
“The Chinese government sees manufacturing as a core issue in security and geopolitical leverage over other countries,” said Gary Ng, senior economist at Natixis.
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