Xiaomi stock continued to rise 4.68% in Hong Kong market. The Chinese smartphone maker 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, Samsung Electronics and Huawei in developing its own chips.

TSMC 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.