Xiaomi’s Ambitions and Concerns in Chip Manufacturing: A Comprehensive Analysis of Automotive and Mobile Chip Markets and the Divergence in International Investment Opinions
By 2025, Xiaomi’s strategy in the technology sector is becoming increasingly aggressive: on one hand, it successfully tapes out the world’s first 3-nanometer mobile chip, while on the other hand, it aims for automotive deliveries of 350,000 units. Lei Jun has stated, “Chips are the pinnacle of mobile technology,” but as the battlefield extends from mobile phones to automobiles, the underlying logic of self-developed chips has quietly changed. This article deeply analyzes the technological gap between automotive and mobile chips, dissects the significant divergence in international investment banks’ target prices for Xiaomi, and reveals the financial undercurrents behind the trillion-yuan ‘chip-making movement’.
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1. Automotive Chips vs. Mobile Chips: A Technological Contest of Size and Process
(1) The Size Battle: Miniaturization vs. Reliability
Mobile chips pursue extreme “miniaturization,” integrating tens of billions of transistors within a space the size of a fingernail. For instance, Xiaomi’s 2024 successful tape-out of a 3-nanometer mobile SoC has a size that is only 1/10th that of automotive chips. In contrast, automotive chips must withstand extreme temperatures, vibrations, and other complex environments, often employing more conservative packaging designs and even requiring redundant circuits to ensure safety, resulting in significantly larger sizes. For example, Tesla’s HW4.0 autonomous driving chip has an area of 260mm², far exceeding the 100mm² limit of mobile chips.
(2) Process Technology: Performance Race vs. Cost Control
Mobile chips are the “vanguard” of process technology, with Xiaomi’s 3-nanometer chip achieving a transistor density of 250 million/mm² and a power consumption reduction of 45%. In contrast, automotive chips still predominantly use mature processes of 14-28 nanometers for three reasons:
– Reliability First: The electronic mobility issues of advanced processes can easily lead to failures at high temperatures;
– Long Certification Cycles: Automotive-grade chips must pass stringent certifications like AEC-Q100, resulting in slower iteration speeds compared to consumer electronics;
– Cost Considerations: The skyrocketing prices of foundry services below 7 nanometers require automotive chips to balance performance with overall vehicle costs.
The technological watershed: Mobile chips are a product of “performance involution,” while automotive chips need to find a balance between stability and computing power. If Xiaomi wants to navigate both tracks simultaneously, it must achieve “dual-track parallelism” in its R&D system.
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2. The “Song of Ice and Fire” of Self-Developed Chips: A Comprehensive Perspective on Xiaomi’s Advantages and Disadvantages
Advantages: From “Choke Points” to “Initiative”
– Supply Chain Security: Amid global semiconductor turmoil, Xiaomi’s reliance on external suppliers for mobile chips exceeds 80% (Qualcomm + MediaTek), and self-developed chips can reduce geopolitical risks;
– Cost Benefits: According to DBS estimates, after mass production of the 3-nanometer chip, labor costs may decrease by 18.8% in 2025, with gross margins expected to exceed 25%;
– Ecological Barriers: The interconnection of automotive systems and AIoT scenarios requires chip-level customization, as seen with Xiaomi’s LaserLink lens technology demonstrating collaborative potential.
Disadvantages: The Technological Deep Waters of a Trillion-Yuan Gamble
– Money Pit: Annual investments in chip R&D exceed 10 billion yuan, with Xiaomi’s chip business directly dragging down profits by 2.4 billion yuan in 2023;
– Mass Production Dilemma: The 3-nanometer chip has been delayed to 2026 due to yield issues, missing the window to compete with Qualcomm’s Snapdragon 8 Gen4;
– Foundry Dependency: SMIC’s 3-nanometer process is not yet mature, and Xiaomi may face the awkward situation of “design leadership, manufacturing bottlenecks.”
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3. Divergence in International Investment Banks’ Target Prices: The Logic Behind the Rifts from 20 HKD to 80 HKD
By 2025, Xiaomi’s target price presents a “tale of two cities,” with the core conflict lying in the valuation of its chip business:
– Optimists:
DBS has sharply raised its target price to XX HKD, believing that humanoid robots + self-developed chips will disrupt cost structures, with a projected profit growth rate of 24.3% by 2027;
China International Capital Corporation bets on the automotive business, setting a target price of XX HKD, expecting 350,000 deliveries in 2025, driving a net profit growth of 6.5%.
– Conservatives:
Goldman Sachs only gives XX HKD, worrying that chip investments will erode cash flow, with the high-end process progressing slower than expected;
Goldman Sachs takes a middle ground with a target of XX HKD, acknowledging the technological breakthroughs at MWC 2025 but warning of the risks in mass production of modular lenses.
The essence of the divergence: Chips are a litmus test for “long-termism.” Optimists see them as a second growth curve, while conservatives question their impact on the profitability of the core business.
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4. Financial Crossroads: Is the Chip Business a “Cash-Eating Beast” or “Alchemy”?
Xiaomi’s 2023 financial report reveals key contradictions:
– Short-Term Pain: Chip R&D has impacted profits from the “electric vehicle/chip business” by 2.4 billion, and “actual investments far exceed the balance sheet”;
– Long-Term Dawn: The gross margin of self-developed chips for mobile phones has reached 16.4% (up 8.2 percentage points year-on-year), validating the technological dividend;
– Strategic Hedging: Lei Jun has laid out over 100 chip companies through Xiaomi’s investment strategy, diversifying R&D risks while building an industrial chain moat.
Key Inference
2025-2026 will be the peak period of financial pressure. If the 3-nanometer chip is mass-produced on schedule, 2027 may see a reversal in profit margins.
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5. Final Outlook: The “Three-Body” Dilemma of Xiaomi’s Chip Manufacturing and Path to Resolution
– Technical Body: Automotive chips need to catch up on functional safety (ISO 26262), while mobile chips need to break through advanced packaging;
– Business Body: Balance the ratio of self-development to outsourcing, learning from Apple’s A-series chips + external baseband model;
– Ecological Body: Connect the “human-vehicle-home” full scene, using chips to define the interaction standards of the Internet of Everything.
Lei Jun’s “chip long march” has reached its midpoint. This gamble could transform Xiaomi into a global technology giant or, due to a tight funding chain, lead to a strategic passive position. The only certainty is that in today’s slowing Moore’s Law, only players who master both “software-hardware synergy” and “ecological self-sustaining capabilities” can navigate the cycle and emerge victorious.
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