Freedom: Xiaomi’s new chip does not yet pose a threat to Qualcomm and MediaTek

China’s Xiaomi (1810) has unveiled a new in-house mobile processor, the Xring O3. The company initially plans to release only 200–300 thousand of these chips, so Freedom analyst Vladimir Chernov does not yet view the new product as a direct threat to Qualcomm (QCOM) and MediaTek. The Xring O3 is important as a step toward Xiaomi’s technological independence. Over the long term, the development of proprietary processors could change the company’s position in the smartphone market.

Xiaomi is one of the world’s largest smartphone manufacturers and also produces consumer electronics and electric vehicles. At present, the company mainly uses processors from third-party makers in its devices, including Qualcomm and MediaTek. Therefore, the Xring O3 will not yet replace their solutions in mass-market models; however, over time it could reduce Xiaomi’s dependence on external suppliers and give the company more control over smartphone development.

Xring O3 does not yet threaten Qualcomm’s and MediaTek’s business

The planned production volume of the Xring O3 is not comparable with the scale of Xiaomi’s smartphone business. The company sells tens of millions of devices annually, whereas initial shipments of the new processor will total just 200–300 thousand units.  

Therefore, Chernov believes it is premature to talk about Xiaomi’s mass отказ of Qualcomm’s and MediaTek’s solutions. At this stage, the company is rather testing the capabilities of its own platform and reducing its technological dependence on external suppliers.

Xiaomi has already been moving in this direction. In May 2025, the company introduced its first flagship processor, the Xring O1, built on a 3-nm process, and announced plans to invest at least 50 billion yuan, or about $6.9 billion, in developing its own chips over ten years. Freedom ⁠wrote about these Xiaomi plans.  

An in-house processor gives Xiaomi more control over the smartphone

The strategic significance of the Xring O3 goes beyond reducing dependence on suppliers. An in-house processor allows Xiaomi to more tightly integrate hardware and software and control how key smartphone functions work—camera, artificial intelligence, and power consumption.

Chernov cites Apple as an example, which has independently developed processors for its devices for many years. Such a model makes it possible to optimize hardware and software as a single system.

For Xiaomi, this approach is especially important in the premium segment. A proprietary platform can help the company more clearly differentiate expensive models from the many Android smartphones with similar specifications and identical processors from third-party manufacturers.

Xiaomi strengthens its position in the premium smartphone segment

Developing in-house chips complements Xiaomi’s strategy of promoting more expensive devices. In September 2025, Freedom ⁠wrote about the launch of the flagship Xiaomi 17 lineup, aimed at strengthening the company’s position in the segment of smartphones priced above $600. At the time, all three models received the flagship Qualcomm Snapdragon 8 Elite Gen 5 processor.  

In March 2026, Xiaomi shares ⁠rose 5.8% amid expectations of new products featuring artificial intelligence. The development of in-house processors potentially gives the company more opportunities to determine on its own how AI functions will be implemented directly on devices.  

Xiaomi strengthens its position in the premium smartphone segment

Developing in-house chips complements Xiaomi’s strategy of promoting more expensive devices. In September 2025, Freedom ⁠wrote about the launch of the flagship Xiaomi 17 lineup, aimed at strengthening the company’s position in the segment of smartphones priced above $600. At the time, all three models received the flagship Qualcomm Snapdragon 8 Elite Gen 5 processor.  

In March 2026, Xiaomi shares ⁠rose 5.8% amid expectations of new products featuring artificial intelligence. The development of in-house processors potentially gives the company more opportunities to determine on its own how AI functions will be implemented directly on devices.  

Thus, the Xring O3 is unlikely to materially affect Qualcomm’s and MediaTek’s sales for now due to the small production volume. However, if Xiaomi successfully scales its in-house processors and begins installing them in a larger number of smartphones, the company’s dependence on external chip suppliers could gradually decline. For Xiaomi itself, this is both an opportunity to strengthen technological independence and improve the competitiveness of premium devices.

Not an individual investment recommendation.