Barclays has reduced its target price for Xiaomi Corporation ADR shares to $30 from a previous target, though it maintained an Overweight rating on the stock. The change reflects the firm's assessment that rising memory prices and a difficult year-over-year comparison in the IoT business will present near-term headwinds for the Chinese technology group.
Memory component costs play a substantial role in Xiaomi's device economics, Barclays noted. For lower-end smartphones, memory accounts for roughly 40-50% of the bill of materials, while for higher-end models it represents about 10-15%. Elevated memory pricing depressed Xiaomi's smartphone sales performance in the fourth quarter of 2025 and is expected to continue to pressure smartphone sales throughout 2026.
Xiaomi management, Barclays said, anticipates memory prices will remain elevated until around mid-2027. The bank attributed this extended semiconductor cycle to demand tied to AI-related buildout, which it said makes the current cycle longer than prior ones.
Against that backdrop, Barclays trimmed its forecasts for smartphone volumes and margins. The broker also pointed to a challenging comparison in the IoT segment during the fourth quarter of 2025 - the first full quarter measured against a base period in which Chinese government trade-in subsidies were in effect. As a result, Barclays estimated the IoT business likely fell by about 20% year-over-year in that quarter despite solid export sales.
Barclays expects the IoT segment to remain down year-over-year until the fourth quarter of 2026. The firm noted the segment includes smart appliances and that roughly 30% of IoT sales come from markets outside China, where those Chinese government subsidies do not apply.
On the electric vehicle front, Xiaomi delivered more than 140,000 vehicles in the fourth quarter of 2025. Barclays observed that EV gross margins may have slipped quarter-over-quarter, a change it attributed to product mix that favored the YU7 SUV over the higher-margin SU7 Ultra. The bank also said rising memory prices have increased EV bill-of-materials costs and affected margins there, albeit to a smaller degree than in the smartphone business.
Overall, Barclays' adjustments reflect a lineup of cost and comparative-demand issues that span smartphones, IoT devices, and EVs, with semiconductor memory pricing a common pressure point across these product lines.
Key points
- Barclays cut its Xiaomi ADR price target to $30 but kept an Overweight rating, citing higher memory costs and weak IoT comps.
- Memory chips make up roughly 40-50% of BOM for low-end phones and 10-15% for high-end devices; elevated prices hurt Q4 2025 smartphone sales and are expected to weigh on 2026.
- IoT sales likely declined about 20% year-over-year in Q4 2025 and are forecast to fall year-over-year until Q4 2026; about 30% of IoT revenue is from markets outside China.
Risks and uncertainties
- Memory price trajectory - Barclays and Xiaomi management expect elevated memory costs through mid-2027, which could continue to press smartphone and EV margins.
- IoT comparison dynamics - the pullback following the period with Chinese government trade-in subsidies created a difficult base that may prolong declines in IoT revenue through much of 2026.
- EV margin variability - product mix shifts toward lower-margin models, such as the YU7 SUV relative to the SU7 Ultra, may reduce gross margins even as deliveries rise.