Rising AI-driven memory costs may hike budget smartphone prices by 30%, pushing consumers toward used devices. The report predicts a significant decline in global shipments and a shrinking affordable phone market through CY27.
AI Demand Impacts Memory Costs
Rising memory costs, driven by growing demand from the artificial intelligence industry, could push prices of low-end smartphones up by around 30 per cent and force consumers to delay fresh purchases or opt for second-hand devices, according to a report by Jefferies.
The report said memory costs have increased sharply as AI-related demand continues to absorb a larger share of global supply. AI is estimated to account for around 60 per cent of memory demand in CY27, while targeted capital expenditure of around USD 1.5 trillion by AI players in the same year could keep memory prices elevated for several more quarters. Memory prices are expected to peak by mid-CY27, according to the report.
Impact on Smartphone Market
However, the impact of rising component costs is already being felt by smartphone manufacturers, particularly in the affordable segment. “Memory cost per unit is likely to have surged ~3x, from est $20 in CY25 to est $60-65 now,” the report said. The pressure is particularly high for low-end Android smartphones priced below USD 200, where memory is estimated to account for around 60 per cent of the total bill of materials. The report said that “a price hike of ~30% in low-end phones could defer new purchases or trigger second-hand affordable purchases”, indicating that higher manufacturing costs could affect consumer buying decisions.
To manage the increase in input costs, manufacturers may reduce the number of lower-priced smartphone variants and downsize their distribution channels. The impact could also be reflected in global smartphone shipments.
Future Market Outlook
The report expects shipments to decline by 15 per cent annually to 1,067 million units in CY26 and 911 million units in CY27. Although the shipment forecasts for CY26 and CY27 were slightly raised by 5 per cent and 3 per cent, respectively, the overall outlook remains weak. The affordable smartphone segment is expected to face the biggest setback. Its share of the global market could decline from 42 per cent in CY25 to 24 per cent in CY26. In contrast, the share of smartphones priced above USD 600 could increase from 29 per cent to 38 per cent during the same period.
The report also pointed to continuing supply-chain pressure, with semiconductor shortages emerging as the biggest bottleneck. Manufacturers are looking at using one- to two-year-old chips instead of the latest flagship processors to control costs. Even if smartphone demand recovers rapidly from CY28, the industry could find it difficult to restore shipment levels if manufacturers reduce production capacity during the current slowdown, the report cautioned. (ANI)
(Except for the headline, this story has not been edited by Asianetnews Editorial staff and is published from a syndicated feed.)