ANDROID Phones Face Price Hikes From Chip Crunch

SMARTPHONE prices are expec­ted to rise in 2026 as device man­u­fac­tur­ers, espe­cially Android brands, face sharply higher costs for crit­ical com­pon­ents, industry ana­lysts warn. The surge is being driven by a tight­en­ing of memory chip sup­plies, a key ingredi­ent in smart­phones, as pro­duc­tion shifts to sup­port high­de­mand AI data centres.

Accord­ing to research from the Inter­na­tional Data Cor­por­a­tion, demand for memory used in enter­prise AI serv­ers, such as high-band­width and advanced DDR5 mod­ules, is con­sum­ing a grow­ing share of global pro­duc­tion capa­city. As a res­ult, fewer chips are avail­able for con­sumer devices, for­cing man­u­fac­tur­ers to adjust their pri­cing and product strategies.

“The memory mar­ket is at an unpre­ced­en­ted inflec­tion point, with demand mater­i­ally out­pa­cing sup­ply. For an industry that has long been char­ac­ter­ised by boom-and-bust cycles, this time is dif­fer­ent,” IDC said in its Decem­ber research.

“The rapid expan­sion of AI infra­struc­ture and work­loads is exert­ing sig­ni­fic­ant pres­sure on the memory eco­sys­tem. These AI work­loads require large amounts of memory, and the short­age, in part, is driven by a real­loc­a­tion of man­u­fac­tur­ing capa­city away from con­sumer elec­tron­ics toward high­mar­gin memory solu­tions to sup­port AI.”

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IDC said that for dec­ades, the pro­duc­tion of DRAM and NAND Flash for smart­phones and PCS had been the primary driver of memory pro­duc­tion, but that the dynamic had now inver­ted. The research firm added that the strong demand for high-band­width memory by hyper­scalers such as Microsoft, Google, Meta, and Amazon had forced the three largest memory man­u­fac­tur­ers, Sam­sung Elec­tron­ics, SK Hynix, and Micron Tech­no­logy, to redir­ect their lim­ited clean­room space and cap­ital expendit­ure toward higher­mar­gin, enter­prise-grade com­pon­ents.

Accord­ing to Intel Mar­ket Research, lead­ing play­ers like Sam­sung, SK Hynix, and Micron are invest­ing heav­ily in advanced node tech­no­lo­gies to meet the grow­ing demand for high-per­form­ance memory in nex­t­gen­er­a­tion data centres.

Memory mod­ule costs cur­rently account for approx­im­ately 15-20 per cent of total server expenses, mak­ing budget fore­cast­ing dif­fi­cult for larges­cale deploy­ments.

“Hyper­scale oper­at­ors now account for over 37 per cent of total Dynamic Ran­dom-access Memory con­sump­tion, a fig­ure pro­jec­ted to grow fur­ther as enter­prises increas­ingly migrate work­loads to the cloud. With cloud ser­vice pro­viders expand­ing their infra­struc­ture foot­prints glob­ally, the need for server­grade memory solu­tions like RDIMM and LRDIMM has intens­i­fied,” it said in its Semi­con­ductor and Elec­tron­ics report.

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Intel Mar­ket Research said that mod­ern data centres now alloc­ate nearly 40 per cent of their hard­ware budgets to memory sub­sys­tems, reflect­ing the crit­ical role of DRAM in per­form­ance optim­isa­tion. The firm added that lead­ing cloud pro­viders had begun deploy­ing serv­ers with memory capa­cit­ies exceed­ing 2TB per node to sup­port com­plex com­pu­ta­tional tasks. It noted that this trend showed no signs of slow­ing as emer­ging tech­no­lo­gies, such as gen­er­at­ive AI, con­tinue to redefine infra­struc­ture require­ments.

Memory now accounts for a sig­ni­fic­ant por­tion of a smart­phone’s bill of mater­i­als. IDC estim­ates it rep­res­ents 15–20 per cent of the cost of mid-range devices and 10–15 per cent for high-end mod­els. With com­pon­ent costs rising, man­u­fac­tur­ers may have no choice but to raise retail prices, reduce spe­cific­a­tions, or both.

The impact is expec­ted to vary across the mar­ket. Low- and midrange Android brands, includ­ing Xiaomi, Oppo, Vivo, Realme, TCL and Trans­sion, oper­ate on tight mar­gins and are likely to pass a sub­stan­tial por­tion of the higher costs onto con­sumers. Mean­while, com­pan­ies such as Apple and Sam­sung are bet­ter insu­lated due to long-term sup­ply agree­ments and fin­an­cial reserves, though they may limit hard­ware upgrades in upcom­ing mod­els to man­age costs.

“In the high end of the mar­ket, Apple and Sam­sung face pres­sure but are struc­tur­ally hedged. Their cash reserves and long-term sup­ply agree­ments allow them to secure memory sup­ply 12-24 months in advance. On the other hand, new flag­ship mod­els in 2026 will likely have no RAM upgrades, stick­ing to 12GB for Pro mod­els rather than increas­ing to 16GB. It is also unlikely that cur­rent mod­els will see the same price erosion seen after the intro­duc­tion of the latest model,” the report stated.