And you are right for embedded! .xz just doesn't work there.
I've also found that on the faster systems, for different uses of mine, when I want the compression to last as little as possible and the total round trip time matters (compression and decompression), gzip -1 gives the best resulting size for the reasonably short time I want to spend.
I've come across quite a lot of firmware on embedded Linux devices that uses LZMA (the xz compression algorithm) to compress the kernel, u-boot, and/or filesystems. One memory optimisation for these, as they are typically being decompressed straight into RAM, is for the decompressor to refer to its output as the dictionary rather than building a separate one, as would be the case in decompressing to the network or disk.
And you are right for embedded! .xz just doesn't work there.
I've also found that on the faster systems, for different uses of mine, when I want the compression to last as little as possible and the total round trip time matters (compression and decompression), gzip -1 gives the best resulting size for the reasonably short time I want to spend.