Xiaomi Faces Dual Challenges as Component Costs and EV Safety Concerns Mount

Xiaomi's stock is navigating turbulent waters, confronting significant headwinds from two distinct sectors of its business. The technology giant is grappling with a severe supply chain disruption in its core smartphone division while simultaneously addressing public skepticism surrounding the safety of its new electric vehicles. This twin burden has exerted substantial downward pressure on the company's share price.

Financial markets have responded negatively to the developing situation, with several key concerns driving investor behavior:

• Surge in Short Selling: Shares listed in Hong Kong have experienced a dramatic increase in short-selling activity
• Component Crisis: The suspension of memory chip purchases threatens the profitability of Xiaomi's primary smartphone operations
• Credibility Questions: Company leadership is being compelled to publicly defend safety standards within its electric vehicle division
• Earnings Scrutiny: All attention is focused on the upcoming quarterly results, scheduled for release Wednesday, which will provide clarity on how these challenges are affecting performance

Memory Chip Market Upheaval Creates Production Risks

A pricing shockwave in the memory chip sector is impacting Xiaomi with significant force. The company, along with other smartphone manufacturers, has halted procurement of memory chips for the current quarter. This decision comes in response to semiconductor suppliers implementing price increases of nearly 50%.

This market shift poses a dual threat to both production capabilities and profit margins. Industry reports indicate that several manufacturers, including Xiaomi, are maintaining DRAM inventories sufficient for less than three weeks of production—a precarious position that jeopardizes future device manufacturing. The stoppage in sourcing these essential components could substantially disrupt planned production targets and overall profitability.

Should investors sell immediately? Or is it worth buying Xiaomi?

Electric Vehicle Ambitions Meet Public Scrutiny

Concurrently, Xiaomi's ambitious push into the automotive sector is facing heightened examination. Chief Executive Lei Jun felt compelled to publicly defend the safety credentials of the SU7 model through social media channels. He accused critics of taking his previous statements out of context in an attempt to damage the company's reputation.

This public rebuttal highlights the intense pressure facing Xiaomi's electric vehicle division. Lei Jun emphasized that safety represents the fundamental cornerstone and non-negotiable prerequisite for Xiaomi's automotive business—a direct effort to reassure both markets and consumers amid ongoing debates.

The forthcoming quarterly report will reveal whether Xiaomi can successfully navigate these parallel crises, demonstrating how effectively the company manages rising component expenses and whether electric vehicle sales can gain momentum despite current public skepticism.