On the evening of September 25, Xiaomi founder and CEO Lei Jun took the stage for his sixth annual keynote, titled simply: "Change." But behind the polished presentation was the story of a company that nearly walked away from one of the most defining — and divisive — decisions in its history: whether to build its own smartphone chips, or abandon the dream for good.
Between 2021 and 2022, as global tech giants raced toward semiconductor self-sufficiency, Xiaomi stood at a strategic crossroads. The company had already endured one painful failure in chipmaking with its earlier Pinecore Surge. Internally, the wounds had not yet healed. And now, a second push — this time with projected investments of up to CNY60 billion (approx. US$8.4 billion) — threatened to derail not just the effort, but possibly the company itself.
During his keynote, Lei Jun reflected on the turning point, noting that the decision wasn't merely a business call. It was, in his words, a choice that would determine Xiaomi's next decade.
A company is divided, and a founder decides
Behind closed doors, Xiaomi's leadership grappled with a defining decision. Executives raised difficult questions: Would investing billions more in custom chip development jeopardize the company's future? Were they on the verge of repeating past mistakes? One executive summed up the dilemma: this was no longer a choice that spreadsheets could answer; only the founder could.
At that moment, Lei Jun shifted the conversation. Ten years from now, he asked, would Xiaomi be proud of having saved billions, or haunted by the decision to abandon its chip ambitions?
The choice became clear. Xiaomi would press forward. Even if full success remained uncertain, the effort itself would lay the technical groundwork to fundamentally reshape the company's future.
From collapse to breakthrough
Xiaomi's first chipmaking push had ended in retreat. The company's Pinecone subsidiary, launched in 2014, managed to produce a midrange chip — the Surge S1 — but never scaled beyond it. By 2018, development had stalled, and Xiaomi quietly shut down the SoC program, leaving only a skeleton team to keep the dream alive.
But by 2020, as the geopolitical and supply chain risks of depending on foreign chips became undeniable, Xiaomi took a hard look in the mirror.
Lei Jun and his team analyzed the strategies of Apple and Huawei and came to a decisive conclusion: no smartphone company has ever succeeded in chip development by starting at the low end. Real success, they realized, only comes from building at the top, targeting flagship performance from the outset.
In retrospect, Lei recognized this as the core flaw behind Xiaomi's first attempt at in-house chips through Pinecone. The failure, he noted, wasn't just technical; it was organizational. Pinecone had been structurally isolated from Xiaomi's main smartphone business, creating persistent friction and inefficiencies.
Despite Lei's personal involvement in trying to bridge the gap between teams, coordination never truly materialized. As he later reflected, Pinecone was, from the beginning, on the wrong path.
A new strategy, a new chip
This time, Xiaomi would take a different route. The chip team would be fully integrated into the smartphone division. The target: high-end, flagship-class SoCs — not small chips, not side projects. The stakes would be higher, but so would the payoff.
In May 2025, Xiaomi unveiled the fruits of its renewed effort: the Xiaomi Surge O1, a self-developed SoC, and the Surge T1, a chip for Xiaomi's wearables. Lei Jun revealed that just the cost of the chip tape-out — the final, critical stage in chip production — totaled US$20 million.
Lei said in his speech that making our own SoC was almost certain to fail. But it is necessary to try. This is a one-in-ten-thousand shot.
For Lei, success was never only about benchmarks or unit sales.
Article edited by Jack Wu
