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India's Serious Fraud Office has recommended Xiaomi be investigated for alleged irregularities in its business model and compliance with foreign investment law, potentially intensifying scrutiny of the ​smartphone maker, a government document shows.

China's Xiaomi (1810.HK) was once India's top-selling smartphone brand but has seen its market share dwindle amid intense competition from Apple and Samsung. ‌It is also battling several tax demands and royalty payment disputes.

The recommendation from India's Serious Fraud Investigation Office (SFIO) said the investigation should examine movement of funds and whether Xiaomi sought mandatory investment approvals as required after India tightened scrutiny of Chinese investments following deadly border clashes between the two nations in 2020.

A person familiar with the matter said the government is examining the memorandum, which was drafted in May and reviewed by Reuters.

The revelation comes ahead of Chinese President ​Xi Jinping's expected visit to attend a BRICS summit in India at the weekend.

"The most important part of the proposed investigation should be examination of the beneficial ownership of foreign investors ​and group entities," the memorandum said.

"The investigation should verify whether any direct or indirect beneficial ownership, control, or change in control was disclosed and ⁠approved as required...It is recommended that a detailed SFIO investigation be undertaken."

In a statement to Reuters, a Xiaomi spokesperson said the company has not received any notice or communication from the SFIO, adding: "We ​accord paramount importance to the laws of the land and comply with them fully at all times."

A spokesperson for SFIO's parent, the Ministry of Corporate Affairs, and the SFIO, did not respond to queries.

The ​SFIO is India's main agency that looks into corporate fraud and has powers to arrest and prosecute offenders. Its proposal for Xiaomi Technology India Private Limited and its related entities is pending approval from its parent ministry, which is a standard process in such cases.

"There is no timeline in such cases for the ministry to decide - it can take months. The ministry may not find enough to proceed or can allow SFIO to start the probe. ​It can also ask other departments to look into the matter," said Meghav Gupta, founder of Indian law firm Consecro Law.

The stricter foreign investment rules introduced in 2020 required prior government approval for ​any investment made by a Chinese entity in India, which businesses, including Xiaomi, had said caused delays.

Earlier this year, India's government relaxed some of the restrictions, as New Delhi and Beijing have been working on maintaining peace at the border. ‌Xi's expected ⁠visit is viewed as an effort to further stabilise relations.

XIAOMI'S MANY CHALLENGES IN INDIA
For Xiaomi, an SFIO investigation could be another setback. It has been unsuccessful in overturning the financial crime- fighting agency's 55.51 billion rupees ($584 million) freeze of its Indian bank assets since 2022 for alleged illegal remittances, which it denies.

Xiaomi has slid to fourth place in India's smartphone market with a 13% share, a drop from 19% it commanded earlier, according to Counterpoint Research. Its India revenue in 2025 stood at $2.52 billion, 40% lower than recorded three years ago.

The SFIO proposal said the agency was recommending action against Xiaomi based on complaints and ​inputs received via the government's commerce ministry, which ​also did not respond to Reuters queries. SFIO also ⁠called for "coordination" with other government agencies, saying overlapping violations will be correlated.

The memorandum did not elaborate on the information SFIO had reviewed, but laid out a 21-point investigation framework with scope, methodology and plan of action, including possible summoning of company executives if required.

Financial statements and auditor reports filed with ​the Indian government should "be tested for material misstatement", SFIO said, adding that statements of current and former directors, CFOs and compliance officers should also ​be recorded.

E-COMMERCE SCRUTINY
Brands like ⁠Xiaomi have become hugely popular in India through online sales of their products on Amazon (AMZN.O) and Walmart's Flipkart.

But small brick-and-mortar retailers have repeatedly accused the two e-commerce companies of entering into exclusive pacts with sellers, which is prohibited under India's Foreign Direct Investment (FDI) laws, saying it hurts the smaller offline businesses. Amazon and Flipkart deny the allegations.

In 2024, India's antitrust agency alleged that Xiaomi was among smartphone companies which colluded with ⁠the two e-commerce ​companies to exclusively launch products online, breaching competition laws, Reuters has reported. Xiaomi has not commented on the matter.

The SFIO investigation ​proposal calls for further scrutiny of Xiaomi on the subject, saying it should be assessed if it had "de facto control" over Indian sellers or launch partners, but represented those arrangements as operating at arm's length.

"The inquiry should specifically cover whether preferential ​and exclusive launches of Xiaomi products on selected e-commerce platforms .... defeated the intent of the FDI policy applicable to e-commerce (companies)," SFIO said.

Chinese smartphone maker ‌Xiaomi (1810.HK) on Monday unveiled a new version of its in-house Xring handset processor, betting that deeper control over key components will help strengthen its supply chain and reduce reliance on external chip suppliers.

The introduction of Xring O3 comes a year after Xiaomi launched its first proprietary smartphone processor, the Xring O1, ​marking the latest step in the world's third-largest smartphone vendor's push to join rivals such as Apple (AAPL.O), Samsung Electronics (005930.KS) and ​Huawei in developing its own chips.

TSMC (2330.TW) will manufacture the new chip using its 3-nanometre production technology, two ⁠people familiar with the matter said.

One of the sources said the chip is expected to power Xiaomi's upcoming flagship folding phone, with ​a shipment target of 200,000 to 300,000 units.

Xiaomi's expansion into foldable phones, a more expensive segment of the market, could challenge leading ​domestic player Huawei.

Huawei shipped 1.6 million foldable phones in China in the second quarter, giving it a 68% market share, followed by Honor with 13.7% and Oppo with 8.5%, according to research firm Smart Analytics Global.

The people declined to be identified because the plans are not public. Xiaomi and TSMC did ​not immediately respond to requests for comment on the chip's manufacturer, production technology or shipment targets.

Smartphone processors, or system-on-chips (SoC), integrate computing, graphics, ​AI processing and imaging functions into a single component.

DEVICE MAKERS PUSH FOR IN-HOUSE CHIPS
Xiaomi's chip push reflects a broader industry trend as device makers seek ‌to differentiate ⁠products and lessen dependence on suppliers such as Qualcomm (QCOM.O) and MediaTek (2454.TW) amid intensifying competition in premium smartphones.

Xiaomi said during an earnings call last week that cumulative shipments of devices powered by the Xring O1, including smartphones, tablets and watches, had surpassed 1 million units since its launch.

Xiaomi has sold about 150,000 smartphones based on the Xring O1 chip since its May 2025 launch, according to the sources.

MEMORY ​COSTS PUSHING UP PRICES
Smartphone makers are ​contending with a global downturn ⁠in device sales, as memory and component costs push up prices and squeeze demand.

Xiaomi sold 65 million handsets in the first half of 2026 at an average price of 1,329 yuan ($197.74), compared with ​84 million units sold at an average price of 1,141 yuan in the same period of ​2025 and 83 ⁠million units at 1,123 yuan in 2024, according to data from Visible Alpha by S&P Global.

Global smartphone shipments are expected to decline 14% in 2026, according to research firm International Data Corporation.

Xiaomi said on Monday it had also contracted TSMC to manufacture two other Xring chips: the ⁠Xring O100, ​a 6-nm neural processing unit that will support Xiaomi's large language model, MiMo, on ​consumer electronic devices, and the Xring D100, a 3-nm chip for autonomous driving.

According to Xiaomi, the O3 has already entered mass production, while the O100 and D100 ​have completed development and are slated for deployment next year.

Xiaomi stock has pulled back in the past few days, erasing some of the gains made in July. It dropped to H$26.40 in Hong Kong, down by 18% from its highest level in June. This sell-off continued even after the company announced strong vehicle deliveries numbers. It recently formed a shooting star candle on the weekly chart, pointing to more downside ahead of its earnings.

Xiaomi, the top Chinese technology company, announced strong vehicle delivery numbers earlier this month. It delivered over 30,000 vehicles in in July, making it one of the biggest and fastest-growing EV companies in China. 

It was the fourth consecutive month in which the company delivered over 30k vehicles a month. It delivered 185k vehicles in the first half of the year, up by 17.18% YoY.

The company hopes to boost these deliveries this year by launchig more vehicles. It recently launched the SkyNomad vehicle, a huge SUV that starts selling between $38,000 and $44,000. Recent data shows that the vehicle has already received over 100,000 reservations. 

Despite this progress, Xiaomi stock has dropped, mirroring the performance of other Chinese EV stocks. Nio stock has plunged despite its strong revenue and delivery growth. Other Chinese EV stocks like XPeng and Li Auto have been in a strong downward trend as well.

Meanwhile, the company’s smartphone business is facing substantial challenges as memory prices surge. A recent report by Omdia showed that the global smartphone market dropped in the second quarter, while Apple and Samsung jumped. 

Xiaomi maintained the third share of the smartphone market with a 11% share. Its share was 15% a year earlier. In contrast, Samsung’s share rose to 22% from 20%, while Apple’s jumped from 16% to 20%. 

The same metrics were visible in Xiaomi’s earnings report. These results showed that its revenue dropped to 99.1 billion RMB from 111.2 billion RMB a year year. Similarly, the profit before tax (PBT) plunged from 13.1 billion RMB to 5.7 billion RMB in the same period.

Xiaomi’s two segments dropped during the period. Its smartphone and AIoT revenue dropped to RMB 79.2 billion from 92.7 billion, while the smart EV, AI, and other initiatives fell to RMB 19.8 billion.

Unfortunately, the challenges that Xiaomi experienced in the first quarter still remain. Memory and chip prices continue soaring. Just recently, Qualcomm, a top supplier, announced that it would increase the prices of its chips. Similarly, companies like SK Hynix, Samsung Electronics, and Micron have all boosted their memory prices. 

Xiaomi stock chart | Source: TradingView

The weekly chart shows that the Xiaomi share price has dropped sharply in the past few years. It has dropped from a high of H$61.55 in June 2025 to the current H$26.18. 

The stock formed a shooting star pattern last week. This pattern is made up of a small body and an upper shadow.

Xiaomi has also formed a mini death cross pattern as the 50 and 100 Exponential Moving Averages (EMA) crossed each other. Therefore, there is a likelihood that the stock will drop further in the near term, potentially to the key support level of H$21.4, its lowest level in June. A drop below that level will point to more downside. 

Xiaomi stock retreated for two consecutive days after a report confirmed that the company was losing market share in the smartphone industry. It slipped to H$25.82 in Hong Kong, a few points below this month’s high of H$26.70. 

A report released by Omdia showed that Xiaomi’s woes mounted in the second quarter, a situation that may lead to weaker revenue and profitability growth. 

Xiaomi’s market share dropped to 11%, making it the third-biggest player in the industry after Samsung and Apple. Its share has been in a slow downward trend after peaking at about 15% in the second quarter of last year.

In contrast, Samsung became the biggest smartphone maker in the world with a share of 22%, while Apple has 20%. The report noted that the delayed launch of Samsung S26-series pushed some demand into the second quarter. Samsung also gained ground in the budget segment.

Apple’s sales were boosted by iPhone 17, which delivered the strongest iPhone refresh and upgrade cycle in the company’s history.

Xiaomi’s market share retreat happened as vendors in the sub-$400 mass market shifted strategy. Instead of prioritizing volumes, they are now focusing on adjusting retail prices and in their premium segments. Rujan Bjorvovde, the Principal Analyst at Omdia, said:

“Managing the surging component costs is incredibly complex and unpredictable, with some vendors facing memory costing more than four to five times what they did a year ago.”

Xiaomi’s business is struggling as the memory crisis intensifies, with memory and storage costs accounting for about 60% of the bill of materials for budget devices. Sadly, there is still no end in sight for this memory crisis, with Apple warning that it will hike prices for its next models.

The most recent earnings report showed that the company’s revenue and profits nosedived in the first quarter. Its revenue dropped to RMB 99.14 billion from RMB 111.29 billion in the same period last year. Smartphone revenue slipped by 10% to RMB79.3 billion.

On the positive side, the smartphone revenue decline was offset by a modest increase in its smart EV, AI, and New Initiatives segment. This segment’s revenue rose by 6.9% to RMB 19.9 billion, helped by more vehicle sales and offset by lower prices. It delivered 80,856 vehicles in Q1, up from 75,869 in the previous quarter.

Its profitability remained under pressure, with the profit for the period dropping to RMB 4.7 billion from the previous RMB 10.89 billion. These dynamics likely continued in the second quarter as its smartphone sales dropped.

Xiaomi stock chart | Source: TradingView

The weekly chart shows that the Xiaomi stock has been under pressure in the past few months as challenges in its business continued. It plunged from H$61.45 in June last year to the current H$25.82. 

The stock has slumped below the 61.8% Fibonacci Retracement level, where most rebounds normally happen. It has remained below the 50 and 200 moving averages.

Therefore, the most likely forecast is bearish as traders wait for its next earnings report, which is expected in August. If this happens, there is a risk that it will drop and retest the support of H$21.35.