Xiaomi’s new Xring O3 is built at TSMC, and aimed at a few hundred thousand phones

Xiaomi has launched the Xring O3, a system-on-chip that TSMC will manufacture on its 3-nanometre process, according to two people familiar with the matter who spoke to Reuters.

The chip pulls computing, graphics, AI processing, and imaging onto a single die and arrives during a difficult stretch for the handset business it is meant to differentiate, with Xiaomi’s profit falling again as memory prices squeeze margins.

Neither Xiaomi nor TSMC confirmed the manufacturing arrangement when Reuters asked. The chip itself is Xiaomi’s own announcement, but the foundry relationship and the production numbers attached to it come from sources rather than from either company.

Those numbers are the most interesting part. The O3 is earmarked for Xiaomi’s forthcoming flagship folding phone, with shipments expected to land somewhere between 200,000 and 300,000 units.

For a company that ships tens of millions of handsets a quarter, that is a rounding error, and it is roughly the pattern the previous generation established. The Xring O1, launched in May 2025, has passed a million cumulative shipments across phones, tablets, and watches, but only around 150,000 of those were smartphones.

Custom silicon at these volumes is not a cost exercise. Designing a leading-edge SoC and buying 3nm capacity to build a few hundred thousand of them is a way of proving the capability exists, which is a different objective from replacing Qualcomm and MediaTek in the bill of materials.

Every premium manufacturer that has gone down this road started the same way. Apple, Samsung, and Huawei all built in-house processors to differentiate their flagships and reduce their exposure to outside suppliers, and Xiaomi has been trying to join them since the Surge S1 in 2017, an effort that stalled and left its chipset division working on connectivity and IoT parts for years afterwards.

Choosing a folding handset as the vehicle is consistent with that logic. Foldables are low-volume, high-margin devices bought by customers who are already paying a premium, which makes them a forgiving place to put a first-generation part and a poor place to discover that the yield economics do not work.

The choice of node says something too. The Xring line has stayed within TSMC’s 3nm family rather than jumping to 2nm, with the O2 reported to sit on the N3P variant, which puts Xiaomi a step behind the parts that will define next year’s premium Android tier.

Cost is presumably part of that calculus. TSMC has declined to rule out further price rises as manufacturing costs climb, and leading-edge wafer allocation is being fought over by companies with far deeper pockets and far larger order books than a smartphone maker running a prestige project.

It is worth noting what Xiaomi can do here that Huawei cannot. Xiaomi is not subject to the US restrictions that severed Huawei from TSMC, so it can buy leading-edge capacity from Taiwan while its domestic rival works around the export control regime with what Chinese foundries can currently produce.

That advantage explains why a Chinese company designing advanced silicon in 2026 does not automatically mean a Chinese company manufacturing it, a distinction that gets lost in most accounts of the country’s chip ambitions. BYD, by contrast, took the domestic route with China’s first 4nm driving chip.

The timing is awkward in one respect. Xiaomi is already absorbing higher component costs from the memory shortage, and adding a bespoke processor to a flagship bill of materials is not the obvious move for a business watching its margins compress.

Xiaomi has not published specifications for the O3, named the folding phone it will appear in, or given a launch date. Nor has it said whether the chip will spread across the tablets, wearables, cars, and PCs that make up the rest of its hardware range.

Reuters reported the story from Beijing. Whether the O3 marks the point where Xiaomi’s silicon stops being a demonstration and starts being a supply chain will be answered by the second phone that uses it, not the first.