Rising Memory Costs Expected to Impact Smartphone Prices
Analysts estimate that memory components currently contribute 10 to 20 percent of a smartphone’s total hardware cost. increasing demand, driven by the growing use of memory chips – previously common in phones – for generative AI applications, is putting upward pressure on prices. Data centers are prioritizing high-bandwidth memory (HBM) for AI and business needs, reducing production capacity available for the less profitable DRAM and NAND memory used in smartphones. This scarcity is leading to price increases that will likely affect all phone manufacturers,across all price tiers.
The cost of various memory types is rising,and this is anticipated to translate into higher smartphone prices. Though, manufacturers may employ different strategies to mitigate the immediate impact.
Realme has already cautioned that memory prices have risen substantially and expect continued growth into next year.The upcoming Galaxy S26 series is also projected to be affected by these increases, following Samsung’s recent price hikes for data center memory – up to 60 percent compared to September pricing.These increases pose a potential threat to memory prices in both computers and mobile phones.
Many manufacturers are anticipating insufficient memory supply to meet demand, leading to preemptive, higher-priced orders to secure stock, a situation reminiscent of the chip shortages experienced during the coronavirus pandemic.
Some companies are opting for older memory technologies, such as LPDDR4X instead of LPDDR5X, which, while less advanced, have also become more expensive - increasing by 10 to 15% in the current quarter. Xiaomi announced a 7.5% price increase on its Chinese Redmi K90 model in October, directly attributing it to rising memory costs. The company’s leadership indicated that memory prices have exceeded expectations and may continue to climb,with other brands expected to follow suit.
Manufacturers face pressure to either reflect these increased costs in phone prices or absorb them, perhaps impacting profits. Smartphone consumers are price-sensitive, suggesting initial price increases will likely be modest, potentially around one percent. However, even a small percentage increase can translate to a significant price difference between phone generations, particularly for higher-end models.
Strategies to offset the rising costs include temporary discounts on base memory configurations, as implemented by Xiaomi in china, or minimizing intergenerational upgrades. In a worst-case scenario, manufacturers may reduce costs by downgrading other phone components, such as cameras, to maintain the same price point.
Analysts offer differing timelines for a return to normal market conditions. Some predict stabilization in the second half of next year, while others foresee continued price increases extending into 2027 or even 2028. Phone manufacturers will need to carefully balance profit margins and cost reduction to remain competitive, recognizing that downgrading specifications on lower-priced phones could discourage upgrades from existing users.
