Lei Jun Turns a Memory Complaint Into Technology News About the End of Cheap Phones

Lei Jun turned a September 7 product question into technology news when he said memory remained too expensive for Xiaomi to deliver the requested discount.

The Xiaomi founder was responding to a user asking whether the Xiaomi 18 Fold could launch at a substantially lower price. Lei said that outcome was unlikely because current memory costs were still extremely high. He then joked about researching how much it would cost to build a memory-chip factory.

The comment sounded casual, but the pressure behind it is measurable. Xiaomi has already reported falling smartphone shipments, higher average selling prices, and shrinking margins during the 2026 memory shortage. Apple, Samsung, Huawei, and other manufacturers face the same component market, although their pricing power differs.

The conflict is larger than one foldable phone. Artificial intelligence infrastructure is attracting memory capacity and supplier investment that once served consumer electronics. Phone makers must now compete with data centers for strategically important manufacturing resources.

That competition breaks a familiar smartphone promise. Consumers have spent years expecting more memory and storage at every price point. In 2026, manufacturers increasingly must choose between higher retail prices, weaker specifications, and lower margins.

Lei Jun Made Xiaomi's Cost Problem Public

Lei Jun's response converted an ordinary discount request into a public admission that Xiaomi has limited room to absorb memory inflation.

The exchange occurred before Xiaomi's September 7 product event. A user asked whether the company could offer a much lower starting price for its new foldable. According to the reported launch-day exchange, Lei answered that this was unlikely because memory remained too expensive.

His factory joke added a second message. Xiaomi cannot negotiate away every cost increase when the underlying supply base is concentrated and capacity takes years to build. Even one of the world's largest smartphone vendors remains dependent on specialized outside manufacturers.

The wording matters because Xiaomi has historically linked its brand to efficient operations and accessible hardware. Its phones helped normalize the idea that advanced components did not require the highest market price. A cost complaint from Lei therefore carries more weight than a routine warning from an industry supplier.

The comment also arrived after months of similar statements from Xiaomi management. The company had already warned investors that memory and other component costs were pressuring smartphones and tablets. Lei was not revealing a problem that appeared overnight.

What changed was the direct connection between that problem and a specific consumer request. Memory inflation was no longer an abstract item from an earnings call. It became the stated reason a prominent new phone could not meet a fan's price expectation.

Foldables make the tension especially visible. Their displays, hinges, cameras, batteries, and processors already create demanding cost structures. Higher memory expenses leave manufacturers with fewer components they can adjust without weakening the experience.

A foldable buyer also expects premium multitasking. Cutting working memory too aggressively would undermine one of the device category's central benefits. Reducing storage would make the phone less appealing to buyers who record large videos or keep extensive media libraries.

Passing the cost to buyers creates another problem. Foldables still compete with established conventional flagships, including products with broader software support and stronger trade-in programs. A higher price can narrow the audience before shoppers evaluate the hardware.

Lei's answer does not independently establish Xiaomi's final manufacturing cost or profit on the new model. The company has not published a product-level bill of materials. Promotional timing, configuration choices, channel incentives, and competitive positioning also affect retail pricing.

However, Xiaomi's financial disclosures support the wider claim that the pressure is real. The social response is best understood as a blunt summary of an already documented business constraint.

The Xiaomi Technology News Is Backed by Its Earnings

Xiaomi's recent financial performance shows that expensive memory is affecting shipments, product mix, and profitability at the same time.

In the first quarter of 2026, Xiaomi shipped 33.8 million smartphones and generated RMB44.3 billion in smartphone revenue. Its smartphone gross margin was 10.1%, according to the company's first-quarter disclosure.

Xiaomi explicitly described sharp memory-cost increases as an industry headwind. It responded by managing sales channels and improving its product mix, meaning it emphasized models that could better support higher component costs.

That strategy lifted the company's smartphone average selling price by 8.2% year over year in the first quarter. Xiaomi said the result represented a record for the company. It also reported that premium devices formed a larger portion of its mainland China sales.

The second quarter intensified the pattern. Xiaomi's smartphone shipments fell to 31.2 million units, down 26.5% from the previous year. Smartphone revenue declined even though its average selling price increased by 25.9%.

Company-wide adjusted net profit fell 42.6% year over year to RMB6.2 billion. Revenue declined 6.1% to RMB108.9 billion. Management identified historically high memory and component costs as important sources of margin pressure.

Those figures do not mean memory caused every decline. Xiaomi also faced weak consumer demand, intense competition, and changes in government support across some markets. Its expanding electric-vehicle operation also affects company-wide costs and investment.

Still, the combination tells a consistent story. Xiaomi protected value per device while accepting lower volume. It could not preserve shipments, pricing, and margins simultaneously.

This is the primary opponent in the story: Xiaomi's accessible-hardware promise versus the economic reality of scarce memory. The company can defend one side only by placing greater pressure on the other.

Absorbing the cost protects consumers but compresses margins. Raising prices protects margins but weakens affordability. Reducing memory protects the sticker price but makes the product less competitive.

Premiumization offers a partial escape. Higher-end phones contain more expensive components, but their buyers usually provide manufacturers with more pricing flexibility. Camera systems, industrial design, and brand positioning can also justify a higher total price.

However, that escape changes Xiaomi's role in the market. A company can remain commercially successful while serving fewer price-sensitive buyers. It cannot claim that outcome leaves its original value proposition untouched.

Lei's comment therefore deserves attention beyond the launch cycle. It exposes a strategic choice already visible in Xiaomi's accounts. The company is protecting its smartphone business by moving toward buyers who can tolerate more expensive hardware.

That choice places additional pressure on Redmi and other value-oriented lines. These products compete through specification density, offering more memory, storage, battery capacity, or display quality than similarly positioned rivals.

When memory becomes disproportionately expensive, specification density becomes harder to sustain. The feature that helped a value brand stand out can become the feature that destroys its margin.

AI Servers Are Winning the Capacity Contest

The memory shortage persists because suppliers have stronger incentives to serve AI infrastructure than price-sensitive consumer devices.

Modern smartphones use two important forms of memory. Mobile DRAM holds active data for applications and system processes. NAND flash provides persistent storage for software, photos, video, and other files.

AI servers need memory too, but at a far larger scale. High-bandwidth memory, or HBM, moves data rapidly between accelerators and nearby memory stacks. Server DRAM supports processors, while enterprise solid-state drives supply extensive storage.

Manufacturers do not move every production line freely between these categories. Different products require distinct processes, packaging, validation, and customer qualifications. However, supplier investment decisions still determine which markets receive new capacity and advanced manufacturing resources.

During 2026, memory companies directed more resources toward server products and HBM. Those categories offered strong demand, large contracts, and attractive returns. Consumer-device manufacturers faced tighter allocations and weaker negotiating positions.

TrendForce said conventional DRAM contract prices increased sharply during the first half of 2026. Its third-quarter outlook projected another 13% to 18% sequential increase during the third quarter.

The firm also projected NAND Flash contract prices would rise by 10% to 15% during that period. It linked continuing demand to AI inference and large data-center deployments.

These increases represented slower growth than earlier quarters, but slower inflation is not the same as falling costs. Prices can continue climbing after the most severe acceleration has passed. Xiaomi still has to procure components at the resulting elevated levels.

TrendForce expected smartphone vendors to raise retail prices because persistently high low-power DRAM costs were difficult to absorb. It also warned that higher prices would weaken handset demand.

The mechanism creates a feedback loop. Suppliers prioritize server products, which constrains consumer memory. Phone manufacturers raise prices or reduce specifications, which suppresses phone demand and makes server customers even more attractive.

Earlier in 2026, TrendForce said cloud providers were securing supply through long-term agreements. Its second-quarter analysis also found suppliers reallocating capacity toward HBM and server applications.

Large cloud customers can commit significant capital years in advance. Smartphone brands must protect flexibility because their demand depends on competitive launches, regional economies, promotions, and replacement cycles.

The result is not a simple contest between identical components. It is a contest over factories, investment budgets, advanced processes, packaging capacity, and supplier attention. AI infrastructure currently offers the stronger economic signal.

Lei's joke about building a factory points toward that imbalance. Constructing a competitive memory operation requires deep technical expertise, specialized equipment, intellectual property, stable yields, and sustained capital spending.

Even successful construction would not produce immediate relief. New facilities require lengthy qualification and production ramps. A phone maker needs components that meet strict performance, energy, reliability, and physical-size requirements.

Domestic Chinese memory production can improve Xiaomi's sourcing options over time. It can also reduce exposure to some geopolitical restrictions. Yet additional suppliers do not guarantee low prices when global demand continues exceeding readily available output.

The more immediate solution remains product and procurement management. Xiaomi can secure supply earlier, simplify configurations, reuse components across models, and favor products with better margins. None of those steps restores cheap memory.

Cheap Phones Carry the Greatest Risk

Memory inflation hurts affordable smartphones more severely because components consume a larger share of each device's available margin.

A premium handset can distribute a cost increase across cameras, materials, software services, brand value, and retail support. A budget handset has far less room. Its appeal often depends on delivering visible specifications near a strict affordability threshold.

Counterpoint Research has described this as a structural threat to the low-end market. Its analysis of the low-end squeeze found that suppliers prioritized higher-value memory products serving AI servers.

That allocation placed general-purpose memory for inexpensive phones lower in the production hierarchy. Vendors selling entry-level devices then faced weaker margins, reduced specifications, or increased retail prices.

This pressure reaches more than Xiaomi. Original design manufacturers produce many affordable devices for Chinese brands and Samsung. They operate at high volume but often have little flexibility when a core component rises sharply.

Larger brands can concentrate limited memory supply on premium devices. They can also negotiate longer contracts, finance inventory, and move marketing toward products with healthier margins. Smaller brands cannot always match those options.

The industry can therefore lose unit volume without losing the same proportion of revenue. More expensive models occupy a greater share of shipments, while affordable models disappear or become less attractive.

Omdia reported that global smartphone shipments fell 6% year over year to 272 million units during the second quarter. Its shipment data connected the decline to memory, storage, and processor costs.

The research firm said vendors were shifting from maximizing volume toward protecting margins and average selling prices. Xiaomi's quarterly results closely fit that description.

Consumers experience this shift through specific compromises. A successor may keep the previous model's memory capacity despite more demanding software. A cheaper configuration may disappear. Storage upgrades may carry a wider premium.

Longer replacement cycles are another likely response. Buyers who cannot find meaningful gains at an acceptable price may keep existing phones, replace batteries, or purchase used devices.

That behavior creates further pressure for manufacturers. Lower sales volumes make it harder to distribute development and marketing expenses across large production runs. Brands then have another reason to prioritize higher-margin devices.

IDC's August 2026 forecast projected global smartphone shipments would fall 16.7% for the year. It expected the decline to become more severe during the second half.

Forecasts can change, especially in a volatile component cycle. IDC had already revised its outlook as conditions deteriorated. That uncertainty is important because it shows how difficult the shortage has been to model.

However, the direction across several datasets remains consistent. Memory inflation is lifting average selling prices, reducing affordable supply, and pushing manufacturers away from volume-focused strategies.

This does not mean cheap smartphones vanish completely. Large emerging markets still create enormous demand, and brands cannot abandon them without surrendering distribution, services, and future upgrade customers.

Manufacturers can redesign products around older memory standards, reduce storage, extend model lifetimes, or subsidize selected configurations. Operators and retailers can also use financing or promotions to soften the immediate burden.

Every response carries a tradeoff. Older memory can limit performance or energy efficiency. Lower capacity can shorten a device's useful life. Financing changes payment timing without eliminating the underlying cost.

Lei's complaint captured this problem in a few words. Xiaomi can still make affordable phones, but maintaining the same specifications and economics has become considerably harder.

Premium Rivals Have More Room to Maneuver

The memory crisis affects every manufacturer, but it does not distribute pain evenly across brands, regions, or product categories.

Samsung participates in both smartphones and memory manufacturing through different corporate divisions. That structure gives it significant market knowledge and scale, although internal supply does not eliminate market pricing or competing customer demand.

Apple has extensive purchasing power, long supplier relationships, and a customer base accustomed to premium devices. It can spread component pressure across product configurations, services, accessories, and several years of active models.

Huawei also competes aggressively in China's premium market. Its brand strength and domestic supply-chain relationships provide options that smaller Android vendors may lack. Oppo, Vivo, and Honor face many of Xiaomi's choices across overlapping price bands.

Xiaomi's global scale offers meaningful leverage, but the company remains strongly associated with specification value. Raising prices can therefore produce a sharper brand conflict than it does for an established premium rival.

Foldables amplify this difference. Buyers already treat folding devices as premium purchases, so manufacturers have more room than they possess in budget segments. Yet competition is intense, and durability concerns still discourage some potential customers.

A foldable cannot rely only on larger memory configurations to justify its position. It must also compete through hinge reliability, screen quality, battery life, cameras, software, and repair support.

Xiaomi can use the 18 Fold to protect margins and strengthen its premium image. That strategy makes commercial sense during a component shortage. It also leaves more affordable customers waiting for relief that the supply chain has not delivered.

The skeptical reading is that memory provides a convenient explanation for a broader premiumization strategy. Manufacturers already wanted higher average selling prices before the latest shortage. More expensive components support a change they might have pursued anyway.

That criticism cannot be dismissed. Retail pricing reflects product positioning, competition, demand, marketing, distribution, and profit targets. Memory is one variable, not a complete explanation for every launch decision.

Xiaomi's public figures nevertheless make a purely rhetorical interpretation difficult. Shipments fell while average selling prices rose, and the company directly identified component costs as a margin problem.

Independent market researchers also documented similar pressure across vendors. The pattern extends beyond Xiaomi, reducing the likelihood that its explanation is only launch marketing.

Another uncertainty concerns how quickly the market adjusts. Higher memory profits encourage new capacity, process improvements, and competition. Weak consumer demand can also reduce orders enough to rebalance supply.

Those corrections operate slowly. Memory factories require long investment cycles, while phone launches follow annual or shorter schedules. Xiaomi must make configuration decisions before future supply relief becomes certain.

The competitive question is therefore about endurance. Premium brands can protect margins while demand weakens. Value brands must keep products affordable without losing the specifications that made them attractive.

Xiaomi sits on both sides of that divide. Its premium ambitions reduce its exposure, but its enormous value-oriented customer base keeps the affordability conflict central.

What the Next Three Months Will Reveal

Three signals will show whether Lei Jun described a temporary peak or a lasting reset in consumer-device economics.

The first signal is Xiaomi's configuration and sales mix following the 18 Fold launch. Memory capacity, storage options, promotional activity, and early channel demand will show how it balances specifications against affordability.

Strong demand for higher configurations would support Xiaomi's premium strategy. Weak demand or rapid promotional changes would suggest that consumers have reached their spending limit.

The second signal is fourth-quarter memory contract guidance. TrendForce already expected third-quarter increases to moderate, but the market needs actual stabilization rather than slower inflation.

Flat or declining mobile DRAM and NAND contracts would weaken the argument for continuing retail increases. Another meaningful rise would strengthen Lei's warning and place additional pressure on 2027 product planning.

The third signal is the next round of smartphone shipment and margin data. Xiaomi's results will show whether higher average selling prices can compensate for lower unit volumes.

Industry trackers will reveal whether the damage remains concentrated in affordable devices. If premium shipments hold while entry-level models retreat, the market's structural shift will become harder to reverse.

Consumers should also distinguish between a slowing shortage and a return to old pricing. Those outcomes are not equivalent. Supply can become less constrained while remaining far more expensive than before the AI infrastructure boom.

This technology news matters beyond smartphone enthusiasts. Memory is embedded in PCs, tablets, routers, game consoles, vehicles, and local AI devices. A sustained capacity shift affects the cost and design of the entire consumer-technology stack.

Developers should expect a wider range of hardware limits across active devices. Applications that assume abundant working memory or storage may perform poorly on products designed during the shortage.

Enterprise buyers should examine device lifetimes and configuration policies. Reducing memory to control procurement costs can create support problems when operating systems and workplace applications become more demanding.

Ordinary users face a simpler decision. They must decide whether new features justify higher prices, whether a current device can last longer, or whether a discounted older model offers better value.

Lei Jun's brief complaint does not settle those choices. It does, however, clarify who currently holds leverage. Memory suppliers and AI infrastructure buyers are setting conditions that phone manufacturers must absorb or pass onward.

Watch Xiaomi's product mix, fourth-quarter memory contracts, and upcoming shipment reports. Together, those signals will reveal whether affordable smartphones recover or become the lasting casualty of the AI investment cycle.