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The 21-year-old, son of seven-time F1 champion Michael Schumacher, was racing for Prema Theodore Racing in the Styrian Grand Prix for the Formula 2 competition on Sunday.
However the German saw his third place vanish when he was put off by the explosion, and he ultimately had to retire.
Schumacher explained the event on Twitter: "Statistically, once every 10 years it can happen that a piece of rubber from the tyres hits this little emergency switch that starts the fire extinguisher.
"It happened to me today while running in third position. Really unfortunate, but our race pace was strong again."
The former Ferrari Academy driver was on course for what would have been his second-ever podium finish.
Semi-finals, Day 14
Round 3 - Portugal