BEIJING (Aug 24): Chinese smartphone maker Xiaomi on Monday unveiled a new version of its in-house Xring handset processor, betting that deeper control over key components will help strengthen its supply chain and reduce reliance on external chip suppliers.

The introduction of Xring O3 comes a year after Xiaomi launched its first proprietary smartphone processor, the Xring O1, marking the latest step in the world's third-largest smartphone vendor's push to join rivals such as Apple, Samsung Electronics and Huawei in developing its own chips.

Smartphone processors, or system-on-chips, integrate computing, graphics, artificial intelligence processing and imaging functions into a single component.

Taiwan Semiconductor Manufacturing Company (TSMC) will manufacture the new chip using its three-nanometre (3nm) production technology, two people familiar with the matter said.

Developing more chips in-house could give Xiaomi greater control over product features and improve its bargaining power with suppliers.

The sources declined to be identified because the plans are not public. Xiaomi and TSMC did not immediately respond to requests for comments on the chip's manufacturer, production technology or shipment targets.

One source said the chip is expected to power Xiaomi's upcoming flagship folding phone, with shipments targeted at 200,000 to 300,000 units.

Its expansion into foldable phones, a more expensive segment of the market, could challenge leading domestic player Huawei.

Huawei shipped 1.6 million foldable phones in China in the second quarter, giving it a 68% market share, followed by Honor with 13.7% and Oppo with 8.5%, according to research firm Smart Analytics Global.

Xiaomi's chip push reflects a broader industry trend as device makers seek to differentiate products and lessen dependence on suppliers such as Qualcomm and MediaTek amid intensifying competition in premium smartphones.

The Beijing-based company restarted development of large, in-house chips in 2021 and has said it plans to invest at least 50 billion yuan (US$7.0 billion or RM30.1 billion) over a decade in the effort.

Xiaomi said during an earnings call last week that cumulative shipments of devices powered by the Xring O1, including smartphones, tablets and watches, had surpassed 1 million units since its launch.

The sources said Xiaomi has sold about 150,000 smartphones based on the Xring O1 since its May 2025 launch.

Smartphone makers are contending with a global downturn in device sales, as memory and component costs push up prices and squeeze demand.

Xiaomi sold 65 million handsets in the first half of 2026 at an average price of 1,329 yuan, compared with 84 million units sold at an average price of 1,141 yuan in the same period of 2025 and 83 million units at 1,123 yuan in 2024, according to data from Visible Alpha by S&P Global.

Global smartphone shipments are expected to decline 14% in 2026, according to research firm International Data Corporation.

A third source said Xiaomi had also contracted TSMC to manufacture two other Xring chips: the Xring O100, a 6nm neural processing unit that will support Xiaomi's MiMo large language model on consumer devices, and the Xring D100, a 3nm chip for autonomous driving.

Xiaomi has invested more than 20 billion yuan in Xring chip development so far, while its semiconductor design unit has grown to more than 3,000 people from 2,500 last year, the source said.

According to Xiaomi, the O3 has already entered mass production, while the O100 and D100 have completed development and are scheduled for deployment next year.

Xiaomi's electric-vehicle business generated 23.9 billion yuan in revenue and delivered 104,199 vehicles in the second quarter.

Uploaded by Tham Yek Lee