Xiaomi's second-generation in-house mobile processor, the Xring O2, will skip TSMC's 2nm process and instead use the company's 3nm N3P node, underscoring a trade-off between performance, cost, and supply availability. The choice also suggests the chip may not power Xiaomi's most premium flagship smartphones.
According to Chinese tech blogger 'Digital Chat Station' and Wccftech, the decision is largely cost-driven. TSMC's 2nm process is estimated to be about 50% more expensive than 3nm, while early capacity is heavily allocated to Apple, Qualcomm, and MediaTek. Securing a meaningful 2nm supply would be both costly and uncertain for Xiaomi.
The move contrasts with Xiaomi's first in-house flagship chip, Xring O1, which debuted in early 2025 using TSMC's N3E 3nm process. It was the first 3nm smartphone processor designed by a Chinese company.
The competitive landscape has shifted rapidly. Apple, Qualcomm, and MediaTek are all expected to launch 2nm-based flagship chips later this year. By remaining on 3nm, Xring O2 risks falling behind in process technology, limiting its role in Xiaomi's highest-end smartphones.
Rising memory prices add pressure to smartphone costs
The decision comes as smartphone component costs continue to rise. Omdia estimates mobile DRAM prices have climbed more than 70% over the past year, while NAND flash prices have more than doubled, pushing overall smartphone bill-of-materials (BOM) costs up by more than 25%.
Against this backdrop, adopting a more expensive 2nm process would further squeeze margins, particularly for Xiaomi, which competes aggressively on price in global markets. "Introducing a higher-cost node while memory and component prices are already surging would significantly pressure profitability," industry analysts say.
Xring O2 targets broader ecosystem, not just flagship phones
Rather than chasing the latest process node, Xiaomi appears to be positioning Xring O2 as a cost-efficient, multi-platform chip that can scale across product categories.
Digital Chat Station previously reported that Xring O2 is being developed for smartphones, wearables, tablets, and Xiaomi's electric vehicles, supporting a unified hardware-software platform across the company's ecosystem.
The chip's name has appeared in China's trademark databases, suggesting formal preparation for commercialization, although Xiaomi has yet to confirm launch details.
The strategy reflects Xiaomi's broader push for cross-device integration, allowing phones, tablets, smartwatches, and future EVs to share common architectures, operating systems, and services. This could accelerate Xiaomi's "one chip, multiple platforms" vision while spreading R&D and manufacturing costs across higher volumes.
Why 3nm still makes strategic sense
While early rumors suggested Xring O2 would remain on TSMC's N3E process, Wccftech now points to N3P, an enhanced 3nm variant offering better performance and power efficiency.
Apple, Qualcomm, and MediaTek are also expected to use N3P for some upcoming flagship chips, even as they prepare for 2nm, making N3P a mature, high-performance option with better yields and lower risk.
By contrast, 2nm production remains capacity-constrained, costly, and strategically prioritised for the world's largest chip buyers.
Export controls add long-term uncertainty
Another factor clouding Xiaomi's future roadmap is access to advanced EDA tools, which remain subject to US export controls. These restrictions could complicate any future transition to 2nm-class designs, where toolchain sophistication becomes more critical.
As a result, Xring O2's role as Xiaomi's potential "unified platform" chip remains uncertain, both technically and geopolitically.
A pragmatic bet, not a prestige play
For now, Xiaomi appears to be making a commercially driven decision rather than a prestige-focused one.
By staying on 3nm, Xring O2 can deliver competitive performance while avoiding the higher costs, supply risks, and geopolitical complications of 2nm. The chip is likely to power upper-midrange phones, tablets, wearables, and automotive platforms rather than Xiaomi's top-end flagships.
In an era of rising component costs and tightening margins, Xiaomi's chip strategy reflects a broader industry reality: advanced silicon is no longer just about technology, but about economics, supply control, and ecosystem scale.
Article edited by Jack Wu
