Xiaomi's first in-house chipset Surge S1 on display during a press conference in Beijing on Tuesday Photo: Zhang Ye/GT

China's leading technology firm Xiaomi Inc on Tuesday launched an in-house mobile processor to showcase its competence in core mobile technologies.

The long-awaited processor, called Surge S1, debuted on the company's Mi 5C smartphone, which was also released on Tuesday during a press conference in Beijing.

A mobile processor, also known as a system-on-a-chip (SoC), is the heart of every smartphone. It supports the operation of applications, including graphics processing, memory management and multimedia decoding.

To demonstrate that Surge S1 is already in commercial production, CEO Lei Jun showed a sample of the chip, which he said is worth 1 billion yuan ($146 million).

The chip, which features an octa-core CPU and Mali T-860 MP4 GPU, was entirely developed by Xiaomi's fully-owned subsidiary Pinecone, which was set up in October 2014. Besides attributing the launch of Surge S1 to Pinecone's engineers, Lei also thanked the local government for its support.

The launch of the proprietary SoC is part of Xiaomi's efforts to break new ground in core mobile technologies. The success of a tech company depends on whether it has core technological breakthroughs, said Lei.

The company is also testing the artificial intelligence waters. Lei disclosed that Xiaomi has been granted 3,612 patents, of which 1,767 are international ones.

In the Geekbench benchmark, Surge S1 outperformed other chipsets in its range such as Snapdragon 625, which was launched by Qualcomm in February, 2016. In the world smartphone market, only Apple, Samsung and Huawei have so far developed their own SoCs.

After more than 10 years of research and development, Huawei is applying a mostly proprietary mobile processor known as Kirin to its major phone models. As of August 20, 2016, Huawei had shipped more than 100 million handsets equipped with Kirin SoC, according to media reports.

Moves like this are in line with the Chinese government's drive to strengthen domestic mobile technologies and reduce reliance on US suppliers, said analysts.

The two Chinese companies also want to end dependence on US-based chip giant Qualcomm, as buying US chips squeezed their profit margins and increased their smartphone costs, Wang Yanhui, secretary-general of the Mobile China Alliance, told the Global Times Tuesday.

At the conference, Lei acknowledged the recent pressure of the yuan's depreciation and rising operating costs in the domestic smartphone market.

 "Xiaomi has high hopes for its independent SoC to restore its glory and add competitiveness to its handsets amid China's heated cellphone battleground. The company can hardly compete with OPPO and Vivo in terms of marketing strategy," Ma Jihua, a Beijing-based IT expert, told the Global Times Tuesday.

Data from International Data Corp showed that Xiaomi dropped to No.5 last year with 41.5 million smartphones shipped in China where it once took the lead, down 36 percent year-on-year.

However, unlike Huawei, which has already devoted years of effort to reaching current levels in the industry, Xiaomi and many other Chinese phone brands will still rely on Qualcomm in the coming two years, said Wang.

"The cost of developing an independent processor is very high. If sales are less than tens of millions of units, the chip is not a profitable business," he noted.