The Chinese technology giant Xiaomi is navigating a challenging period marked by simultaneous headwinds from the global market and escalating legal troubles. With a tightening shortage of memory chips threatening its already low-margin smartphone business and a significant tax dispute brewing in India, the company’s resilience is being tested. This raises questions about whether its ongoing share repurchase program can provide meaningful support under such conditions.
Legal Escalation: A High-Stakes Tax Battle in India
A serious legal confrontation is unfolding in India. Reuters reports that Xiaomi has appealed to the country’s Supreme Court against a ruling from a tax tribunal. The tribunal alleges the company evaded approximately $72 million in customs duties related to royalty payments.
The core of the dispute centers on the declared import value of components shipped from China over several years up to 2020. Authorities contend that 2% to 5% in royalty payments, including fees for technology use, were not factored into the customs valuation. Xiaomi’s appeal argues that the tribunal incorrectly classified the company as the “economic owner” of these components.
The stakes are high. Should Xiaomi lose its appeal, the total financial liability, including accrued interest and penalties, could surpass $150 million, according to Reuters. The Supreme Court has requested a response from the Indian government, with the next hearing scheduled for April. In a related development, the US-based contract manufacturer Flex, also named in the case, has sought to overturn the ruling and denied allegations of knowingly participating in any scheme to conceal information.
Chip Shortages Squeeze the Core Smartphone Business
Compounding these legal worries are severe supply chain pressures. The smartphone sector received sobering news recently. Updated projections from IDC indicate that global smartphone shipments are forecast to drop by 12.9% to roughly 1.12 billion units in 2026, which would represent the largest annual decline on record. A constrained supply of memory chips is the primary driver.
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This situation is particularly precarious for Xiaomi. The company’s scale is heavily reliant on entry-level and mid-range devices, segments characterized by thin profit margins that offer little buffer against cost increases. Rising expenses for DRAM and NAND flash memory are intensifying pricing pressure. IDC further anticipates the global average selling price for smartphones will jump 14% to $523 in 2026. Such price hikes risk dampening demand in cost-sensitive markets. Consequently, IDC predicts the entry-level and mid-tier segments themselves could contract by 20% or more.
The stock’s performance reflects this tense environment. Shares recently closed at €3.82, a level that sits approximately 46% below the 52-week high and significantly under the 200-day moving average (€5.18). Furthermore, the price is hovering just above the 52-week low (€3.62), signaling persistent market caution.
Share Buybacks Continue Amidst Uncertainty
Despite these dual challenges, Xiaomi’s management is proceeding with its announced capital return program. Exchange filings show the company purchased 2.8 million Class B shares on both February 24 and 25, spending about HKD 100 million each day. This follows the earlier authorization of a buyback framework of up to HKD 2.5 billion.
Market participants are now looking ahead to the next potential catalyst: the release of quarterly results in March. For the first nine months of 2025, Xiaomi reported robust growth, with revenue climbing 32.5% to over RMB 340 billion and net profit surging 140% to more than RMB 35 billion. The critical focus will be on management’s forward-looking commentary and how it assesses the business outlook in the context of the ongoing memory chip crisis—a factor that currently represents the most sensitive lever for investor expectations.
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