Xiaomi smartphone GP may drop 30% given rising memory cost

Some simple calculation:

Xiaomi smartphone GPM was 12.6% in 2024, with 192bn revenue.

Xiaomi sold 1.64 billion smartphones that year.

The GP per handset is about 147 RMB in 2024

Across different smartphone models, memory cost is different, ranging from 50-500 per handset.

But in a nutshell, it’s about 12-18% of BOM.

It’s could be about 150 memory cost per handset for Xiaomi, which is similar to GP per handset.

Then if memory cost is rising 50-100%, the entire GP per handset could be at risk.

To offset, Xiaomi may increase prices for customers.

And as a large customer for memory chips, it may not receive full mark-up immediately.

In the end, maybe 1/3 of the memory cost impact of 120 need to be absorbed by Xiaomi.

Then GP per handset could be more like 100-110 RMB.

And as the price increases, volume could be impacted, plus the RMB appreciation recently (two-thirds of Xiaomi smartphone volume is overseas).

Total impact to Xiaomi smartphone GP could be like 65-75bn, or 25-30% negative impact from 2024 level.

Sea change?

1/ FSD approval in China.

I have seen various posts on Chinese social medias that Tesla FSD is being updated in China. Not many news mentions though. This was previewed by Elon Musk back in Nov 2025 and recently in Davos.

2/ TikTok US deal finalized

3/ Trump Administration Pushes Out Key Officials Focused on China Tech Threat – WSJ

4/ Medtronic and Mindray North America broaden strategic partnership

5/ H200 China approval after US approval

6/ BYD and ExxonMobil signed a long-term strategic cooperation memorandum on 26 January

 

Edit:

Jensen Huang on Jan 29 said H200 has yet to be approved in China.

Notes on JPY strength

Coordinated intervention

Reports that the New York Fed did “rate checks” (often interpreted as a potential prelude to intervention) plus Japan officials stressing coordination with the U.S. put the market on alert.

Previous examples

In March 2011, the G7 announced concerted intervention after extreme yen volatility following Japan’s earthquake.

What was happening in 2011?

Markets anticipated Japanese insurers and investors would bring money back to Japan to pay claims and fund rebuilding.

What’s happening now and why US wants a stronger yen now?

Excess volatility and disorderly FX moves can harm economic/financial stability

Japan’s finance minister has said the U.S. Treasury secretary shared concerns about “one-sided depreciation” of the yen, which signals the U.S. doesn’t want to be seen as tolerating a move that could be framed as giving Japan an unfair export boost.

A weak yen can worsen import-cost inflation and political stress in Japan.

Some exit from Japan might cause the temporary yen weakness (e.g. China selling).

 

 

Solana note

Solana’s price was up 86% in 2024 and down 34% in 2025.

Most of the pullback happened in q4 of 2025 which was around 40%.

At the end of Q3 2025, Solana price was about $208, still up compared with 2024 year end of $189.

Two most important drivers for Solana network and price are meme coins and stable coins.

For meme coin, it seems the frenzy has cooled down in 2025, using these indexes as reference: CoinDesk Meme Index or MarketVector Meme Coin Index.

On the stable coin side, adoption (stable coin on solana) has more than doubled from $5bn at end of 2024 to $13bn in Sep 2025 according to this, but no meaningful increase in 4q2025.

Human brain vs AI model

Human brain has 86 billion neurons, which forms 100 trillion synaptic connections.

That 100 trillion is the first-order proxy of model “weights”.

Currently, SOTA AI models could have ~2 trillion parameters or model weights.

For example, OpenAI’s GPT 5.2 model is estimated to have 1-5 trillion parameters, while GPT 3 has 175 billion parameters. Meta Llama 4 Behemoth (MoE) has nearly 2 trillion parameters.

Thus AI models now are closer to human brains. Only 50x difference.

However, human brains is not just 100 trillion synaptic connections.

  • A synapse isn’t a single scalar. It has multiple properties (strength, short-term plasticity, release probability, receptor composition, timing effects, etc.). So raw physical degrees of freedom per synapse could be >1.

  • Not all synapses are independently controllable. Biology adds constraints and correlations (developmental wiring rules, local learning, neuromodulators, homeostasis). That means the effective independent DoF is likely lower than “#synapses × variables”.

  • The brain has lots of additional state beyond synapses. Neuron membrane potentials, ion channel states, neuromodulator concentrations, glial regulation, oscillations, etc. That adds dynamic DoF that don’t map cleanly to “parameters” the way a static model does.

Another thing need to keep in mind how energy-efficient a human brain is.

A typical adult brain runs on about ~20 W.

How to operate a SOTA model?

ChatGPT gives me this

for a dense FP16 2T model, 32 H200 GPUs is the “it loads and runs” baseline, while 48–64+ GPUs is where you start getting reasonable headroom + throughput, depending on your target context and requests/sec.

So about 40 kw.

That would be about 2000x energy consumption than human brain.

Of course human is not just about brain, so about 400x.


GPT 5.2 estimated parameters

Alibaba hits out in all directions

a) Delivery

Since 2025, Alibaba used massive subsidies to compete with Meituan.

b) Micro-loan facilitation

In 2025, the industry faced regulatory crackdown on high fees or high APR, while Alibaba’s Ant Group operates at lower APR segment.

c) OTA

Trip.com (previously CTrip), the leader in China OTA, is targeted by regulators recently for antitrust issues.

d) PDD

In e-commerce, the industry faced some scrutiny and PDD is being probed.

Consumption is a bigger component of China’s GDP than fixed investments

China’s fixed investments in past 5 years

China reported 社会消费品零售总额 Total Retail Sales of Consumer Goods (a narrower concept than consumption) is 501,202 亿元 in 2025, up 3.7% yoy.

China reported 社会消费品零售总额 is 487,895 亿元 in 2024.

From 2020 to 2025, fixed investments % of GDP has lowed from over 50% to 35%.

Meanwhile, 社会消费品零售总额 finally surpassed fixed investments in absolute amount in 2025, by a think margin.


Also see previous post on consumption: When we are saying China needs to boost household consumption

China has a large consumer market but where is growth

Online physical goods consumption cagr is almost 0% from 2023-25. [reported 6.5% and 5.2% growth in 2024 and 2025]

2023年,实物商品网上零售额130174亿元

2024年,实物商品网上零售额130816亿元

2025年,实物商品网上零售额130923亿元


Overall e-commerce growth, which is ~2% cagr 2023-25. [reported 7.2% and 8.6% growth in 2024 and 2025]

2025年,全国网上零售额159722亿元

2023年,全国网上零售额154264亿元


Ex-auto consumption growth is 3.3% cagr 2023-25. [reported 3.8% and 4.4% growth in 2024 and 2025]

2025年,除汽车以外的消费品零售额451413亿元

2023年,除汽车以外的消费品零售额422881亿元


Accumulated CPI is 0.5% from end of 2022 to end of 2025 (36 month).

 

Howard Marks’ fallacy

In his book The Most Important Thing Illuminated, Howard Marks wrote this –

Our goal isn’t to find good assets, but good buys. Thus, it’s not what you buy; it’s what you pay for it.

Obviously there is merit to this. Warren Buffett 1.0 could agree with Howard Marks here.

But clearly this contradicts with Charlie Munger and Warren Buffett 2.0, who are willing to pay fair price for good assets.

The “fallacy”, if any, could origin from Marks’ expertise in distressed debts.

A huge difference between equity and debt is that debt doesn’t have unlimited upside.

Debt’s blue sky scenario is limited – receive full payment in interests and face value. Thus price is extremely important.

Equity could have “unlimited” upside for a good company. These good assets have unlimited upside, which makes paying fair price a good deal.

That unlimited upside makes the additional 10% or 20% discount in entry price less relevant.

 

US following China policies?

1/ Drug prices

China used volume-based procurement to lower drug prices by 50-90%.

Trump in May 2025 signed EO seeking to cut drug prices by 59% and 90%.

 

2/ Housing 

In China, “houses are for living in, not for speculation” has been the guideline till 2023.

Trump last week (Jan 7) said US to ban large investors from buying homes.

 

3/ Personal loan interest rate

China asked several funding sources to lower interest rates – banking (Apr 2025) capped at 24%, consumer finance companies average 20% (Oct 2025), micro lenders 4x LPR or ~12% now (Dec 2025).

Trump called for 1-year 10% interest cap on personal loans on Jan 10.