Despite their absence in the US market, Xiaomi’s phones, including those from its Redmi sub-brand, have been popular and notorious for their dirt-cheap prices despite near-flagship features. Those prices have indeed risen over the years along with other smartphones but Mi and Redmi phones have remained considerably cheaper than their peers. That might not last long, though, and not simply because of the rise in component prices but especially because of the global shortage in chip supplies.
Due to a combination of factors, many of them stemming from the COVID-19 pandemic last year, the demand for semiconductors, specifically chips used in consumer electronics, has far outstripped manufacturers’ ability to supply these. First observed in the automotive industry, this chip shortage has now spread to computer components as well as smartphones and threatens not just the supply of products but also their prices.
The latter is the scenario painted by Xiaomi president Wang Xiang at the company’s recent earnings call. Prices for these critical chips have grown higher due to the low supply and high demand and barring removing features from future phones, Xiaomi might be forced to pass on these costs to consumers. In other words, Xiaomi’s next smartphones could end up being higher than they normally would.
It isn’t an inevitable possibility, though, as Wang still believes the company is looking okay, at least for now. In addition to the difficulty in getting their hands on important components, Xiaomi also faced a US restriction that barred American companies from investing in the Chinese tech giant. That order was overturned by a US district judge this month but the drama is far from over.
Xiaomi wouldn’t be the only OEM hit by this chip shortage, especially when that shortage has affected Qualcomm itself. The chip maker’s 5G modems, in particular, have been affected by the closure of Samsung’s production plant in the US and that, in turn, is affecting its ability to meet the demands for the chips of smartphone makers.