Xiaomi's offices were tense.
The Mi 3's performance issues had escalated, and now the leadership team had gathered to consider their options.
Lei Jun sat at the head of the table, brows furrowed.
"I'm still not confident about MediaTek chips," he said.
"They generate too much heat and are inefficient compared to Qualcomm. Not suitable for a flagship device."
MediaTek processors have been used in Xiaomi's Redmi series before, mainly because of their low cost. But everyone in the room knew it:
MediaTek couldn't hold up in the premium tier.
Xiaomi's digital series—the Mi line—had to be different.
The Mi 3 was priced at ¥1,999 (≈ $275 in 2025).
That meant even a slight hardware cost increase—like switching back to Qualcomm—would obliterate their razor-thin profit margins.
"We only make about ¥100 (~ $14) profit per unit as it is," someone muttered.
Lin Wen, head of the mobile division, broke the silence:
"Why don't we just raise the price by ¥100?
This is the third-gen Mi phone. We've never increased prices—it's long overdue."
Lei Jun was quiet.
Competitors had already raised their prices. Everyone else was adjusting to inflation, logistics costs, and chip shortages.
But Xiaomi had promised something more.
"Our fans are the reason we're here," he said.
"Without them, we wouldn't have survived the first generation."
"We'll keep the Mi 3 at ¥1,999.
Pause sales for now and negotiate with Qualcomm for better pricing."
That night, Xiaomi suspended Mi 3 sales and resumed talks with Qualcomm to secure a viable chip solution.
📉 The Market Was Changing Fast
Elsewhere in Shenzhen, Huawei was undergoing major internal reforms.
After restructuring its mobile division, Huawei finally got back on track—and it wasn't playing safe anymore.
In the feature phone era, Huawei relied on its strengths in communication tech and secured contracts through carrier partnerships. Those days were gone.
Smartphones have shifted the rules.
Now, users cared about:
Performance
UI experience
OS smoothness
System updates
App ecosystems
Not just network quality.
Adding to that pressure, carriers were changing how they sold phones:
Two Sales Models:
Old Model – Bulk Purchasing
Carriers bought large quantities of phones and bundled them with recharge packages.
Suitable for manufacturers: guaranteed volume, no customer acquisition stress.
New Model – Retail Integration
Carriers let brands open "shop-in-shop" displays at business centers.
Users choose plans and pick phones themselves.
Only high-performance, reputable brands get promoted.
Manufacturers are now competing directly at the retail level.
Huawei realized that they'd get phased out if they didn't adapt.
That's when Yu Dazui took over Huawei's consumer business.
He brought a new mindset:
"We're done playing defense. We're building our system. Our chip."
Under his leadership, Huawei developed the Kirin processor, a landmark moment.
For the first time, Huawei released a phone powered by its own silicon.
It was a bold signal to the industry:
Huawei was all in.
The impact was immediate.
Huawei's solid reputation from the feature phone era carried over.
With aggressive marketing and its own chip, it was gaining steam fast.
Competitors who had once dismissed Huawei as "too slow" were now worried.
Even if the phone itself wasn't groundbreaking, the message it sent was crystal clear:
"We're building our future. No more depending on foreign suppliers."
Haifeng read the headlines quietly from his China Star office.
While Xiaomi paused and Huawei surged, he just smiled.
Because he knew…
The real disruption hadn't even started yet.