New Delhi: The smartphone industry is heading into its biggest pricing shake-up in more than a decade. After years of steady cost reductions, the parts that power modern phones are no longer getting cheaper. In fact, some of the most important components are becoming dramatically more expensive.
This change is being driven by artificial intelligence. The same memory chips used in smartphones are now in massive demand from AI data centres. Cloud giants are locking in supply years ahead, leaving phone makers to fight for what remains. As a result, costs that once fell every year are now climbing fast.
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AI is draining the world’s memory supply
For 15 years, phone makers could rely on falling memory and storage prices to deliver better phones without raising prices. That model has now broken. AI servers use huge amounts of high-performance memory, and they are buying it in bulk. This is pushing smartphone brands into direct competition with trillion-dollar tech companies for the same components.
In some cases, memory prices have already tripled. Parts that cost under $20 last year can now cost over $100 in premium phones. Memory is no longer a small line item. It is quickly becoming one of the biggest costs inside a smartphone.
Old pricing model is no longer working
When core parts get more expensive, something has to give. Brands now face two choices: increase prices or cut specifications. Many phones in 2026 could become 30% more expensive, especially at the high end.
Budget and mid-range segments will feel the impact the most. These models depend on tight margins. If costs rise too much, some devices will simply disappear. Industry analysts expect certain markets to shrink by up to 20% as a result.
Why brands are rethinking what matters?
The specs race has become too costly to sustain, and phone manufacturers have to switch gears. There is no longer a quest to pursue larger RAM and storage figures. The issue at hand is the feel and appearance of the phone and its functionality in everyday life.
This is already being adopted by such brands as Nothing, which has prioritised design and user experience over raw specifications. With the increasing cost of hardware, the software, design and usability over a long period of time will be a significantly larger part of the purchase decision.
The era of cheap silicon is ending. The AI boom has changed the rules of the global supply chain. Smartphones are no longer the top priority for memory makers.
What comes next is a reset. Phones may become more expensive, but they may also become more thoughtful. In 2026, the battle will not be about who packs the most hardware inside. It will be about who builds the best experience.