Xiaomi on Monday unveiled the Xring O3, its second in-house smartphone processor, with TSMC set to manufacture the chip using 3-nanometre process technology. The move deepens the Chinese smartphone maker push into custom silicon as it seeks to reduce dependence on external suppliers and strengthen its supply chain.
The Xring O3 arrives a year after Xiaomi launched its first proprietary smartphone processor, the Xring O1, and will power the company forthcoming flagship folding phone. Xiaomi is targeting shipments of 200,000 to 300,000 units of the new device, according to sources familiar with the matter who spoke to Reuters.
A Broader Chip Strategy
Neither Xiaomi nor TSMC confirmed the manufacturing arrangement when asked. The chip itself was Xiaomi own announcement, but the foundry relationship and production numbers come from industry sources rather than official statements. The Xring O3 integrates computing, graphics, AI processing, and imaging functions on a single die, following the same system-on-chip architecture used by Apple, Samsung, and Huawei.
Xiaomi has invested more than 20 billion yuan ($3 billion) in chip development so far, with its semiconductor design team now exceeding 3,000 employees. The company also announced plans to invest at least 50 billion yuan ($7 billion) over the next decade. Beyond the O3, Xiaomi is developing the Xring O100, a 6-nm neural processing unit for its MiMo AI model on consumer devices, and the Xring D100, a 3-nm chip for autonomous driving. Both are expected to deploy next year.
Volume Challenges Remain
The scale of the Xring O3 production run highlights the difficulty of competing in custom silicon. The Xring O1, launched in May 2025, has passed one million cumulative shipments across phones, tablets, and wearables, but only around 150,000 of those were smartphones. At these volumes, custom silicon is not a cost exercise but a strategic one, signaling capability and reducing long-term supplier leverage.
The Xring line has stayed within TSMC 3nm family rather than jumping to 2nm, placing Xiaomi a step behind next year premium Android tier. As The Next Web noted, Xiaomi can access leading-edge TSMC capacity in a way Huawei cannot, since Huawei faces US restrictions that severed it from Taiwan foundries.
The chip push comes during a challenging period for Xiaomi smartphone business. The company sold 65 million smartphones in the first half of 2026, down from 84 million in the same period last year, as memory price increases and weaker consumer demand squeezed margins. Rising component costs make adding a bespoke processor to a flagship bill of materials a counterintuitive move, but one Xiaomi clearly views as necessary for long-term differentiation.
Xiaomi has not published specifications for the O3, named the folding phone it will appear in, or given a launch date. Whether the chip marks the point where Xiaomi silicon stops being a demonstration and starts being a supply chain may be answered by the second phone that uses it, not the first.
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