Xiaomi is making further strides in its quest to exert more control on the smartphones it manufactures with the introduction of its new chipset, Xring O3. The chip is being created as part of the Chinese smartphone manufacturer’s plans to cut down on outside semiconductor suppliers and gain more control of the hardware powering its devices. Sources close to the company say Taiwan Semiconductor Manufacturing Company is likely to produce the Xring O3 with its state-of-the-art 3 nanometre process.
The new processor is a new addition about a year since Xiaomi launched its first proprietary processor, Xring O1. The move indicates that the Chinese smartphone maker is now taking chip development seriously—a path it has not done in the past. But as they struggle to carve out a significant space in the ever-competitive premium smartphone market, the control over processors can impact the performance of the device, its artificial intelligence features, battery efficiency, imaging, and product design.
The Xring O3 is likely to be part of Xiaomi’s next-generation flagship foldable smartphone, as one source reports. Xiaomi is said to be shipping between 200,000 and 300,000 of the device. The targets are being met would give the processor a chance to test its newest chip technology in one of the most competitive, technically-oriented areas of the smartphone market.
According to people with knowledge of the matter, TSMC will make the Xring O3 on a 3-nanometre manufacturing process. As the chipmaking process gets smaller, semiconductor designers can integrate more transistors into a given space, which can lead to better performance and power efficiency. The manufacturing alliance also demonstrates the complex picture behind China’s semiconductor aspirations: Companies are capable of designing ever more powerful processors and then outsourcing the manufacturing to overseas foundries.
Over the past few years, Xiaomi has been investing in semiconductor development. The company began developing large chips internally in 2021, and has said it will spend at least 50 billion yuan ($7 billion) on it over the next decade. The investment amount implies that Xiaomi considers the use of proprietary chip technology to be not just another characteristic of some select smartphones but as a key component of its future.
The tactic brings Xiaomi in the company of some of the smartphone industry’s biggest names. Apple has been creating its own processor platforms for the iPhone and other devices, and Samsung is developing chips in its semiconductor arm. Huawei is also continuing to invest in its silicon development efforts in order to become more self-reliant technologically. The lesson is obvious: more control over the core technology will allow device makers more flexibility in optimizing the hardware and software as a system.
One particular component of a smartphone is especially significant: the smartphone processor, which includes a few of the most important functions in one device or SoC. A modern SoC is capable of the general computing, graphics, artificial intelligence workloads, photography and imaging workloads, connectivity, and other workloads. This of course can affect other factors other than just processing speed when developing such technology in-house.
It could also have other advantages for Xiaomi in terms of its tie-ups with chipset vendors like Qualcomm and Media Tek. Relying on other manufacturers for processing can reduce a smartphone manufacturer’s ability to customize, and can subject the manufacturer to price changes, availability and product road map changes. For Xiaomi, an in-house processor provides another choice and may bolster their negotiating stance in terms of procuring other parts.
The company’s status on Xring O1 gives an early glimpse into the development of the strategy. During an earnings call, Xiaomi stated that Xring O1 chips’ cumulative shipments reached 1 million units since its launch. Some of these products are smartphones, tablets and smartwatches. According to people with knowledge of the company’s sales, about 150,000 smartphones equipped with the Xring O1 have been sold since it was launched in May 2025.
The Xring O3 might be a more ambitious step in its evolution. If Xiaomi does decide to enter the premium foldables market with a flagship phone, its in-house processor would be an even more significant feature of its offering for performance, efficiency and software optimisation. The larger screens and additional features that can come with the more complex hardware of foldable devices also demand extra care with power management.
It’s important to note that Huawei has already built a solid foothold in China’s foldable smartphone segment – and this is the reason for the timing. In China, Huawei’s reported share of the foldables market was 68% in the second quarter of 2026 with the shipping of approximately 1.6 million foldables devices. Honor was 13.7% in second place and Oppo 8.5%. This is the area in which Huawei has a significant lead and with Xiaomi’s expected growth, competition will get tougher in this space.
Meanwhile, Xiaomi is struggling in the smartphone market. Memories are becoming more costly and components are rising in cost, which are straining manufacturers and consumers, and lower demand for premium devices is making such growth more difficult to maintain. The first half of 2026 saw the company’s smartphone sales total about 65 million, while in 2025 they reached 84 million and in 2024, 83 million.
What’s interesting is that the company’s ASP has trended in the reverse direction. The average price of Xiaomi’s handsets in the first half of 2026 was approximately 1329 yuan, or roughly $198. This is up from the average of 1,141 yuan in the same time in 2025 and 1,123 yuan in 2024. The figures show Xiaomi is further moving towards premium devices, but unit sales have been weak.
This change might be significant for the Xring O3 in particular. If the proprietary chip is a success, it would be able to help distinguish the high-end smartphones of Xiaomi from the specs that are easy to match. More cohesive use of the company’s processor, operating system, artificial intelligence and camera capabilities would give Xiaomi a better handling of the whole experience.
