Premium cameras, huge displays, and substantial storage typically render smartphones costlier. However, next year, a standard component might be driving up prices: memory.
And this affects more than just phones. Any device utilizing memory, from handsets to tablets and smartwatches, could become dearer.
Memory costs are climbing for personal electronics because major producers are instead boosting output for AI data centers as artificial intelligence firms flourish.
“It is largely severe and strained across the board,” commented Yang Wang, a senior analyst at Counterpoint Research.
The International Data Corporation, a worldwide market research entity, indicated earlier this week that the smartphone arena is projected to contract by 0.9% in 2026 partly due to memory scarcity. Memory rates are anticipated to leap by 30% in the final quarter of 2025 and might ascend an additional 20% early next year, Counterpoint Research stated last month.
A surge in data center need
Technology corporations such as Meta, Microsoft, and Google have vigorously scaled up their data centers and infrastructure this year to match AI needs. And that expansion is predicted to persist: A survey from McKinsey & Company suggests firms will commit almost $7 trillion to data center facility-related expenditures globally by 2030.
That has prompted memory manufacturers like Micron and Samsung to redirect their attention toward data centers, which employ a different memory sort than computers and smartphones. Consequently, fewer resources remain for consumer goods, mentioned Wang.
Memory and storage firm Micron disclosed on Wednesday that it is withdrawing from the consumer memory segment, citing an “upswing in demand” originating from “AI-fueled expansion” in data centers.
Jaejune Kim, executive vice president for memory at Samsung, stated in October that the firm observed robust demand for memory for AI and data centers in the third quarter. He also suggested the supply deficit for mobile and PC memory is set to “deepen further.”
Elevated phone expenditures
Device makers might need to make challenging choices regarding when to debut and how to set the cost of their products, experts advise. TrendForce, a research group monitoring the semiconductor sector, estimates memory price increases have rendered smartphones 8% to 10% pricier to manufacture in 2025 (higher manufacturing expenses do not always translate into higher consumer prices for numerous reasons).
Certain smartphones might command higher prices as soon as early next year, noted Nabila Popal, a senior research director for the International Data Corporation. Budget Android phones might feel the greatest impact, since less expensive products generally operate on tighter margins.
“It will become nearly impossible for them to avoid increasing prices” for less costly Android phones, asserted Popal.
Firms might also delay phone releases to concentrate on premium models that could yield greater profit. The average selling cost for smartphones is projected to rise to $465 in 2026, compared to $457 in 2025, according to Popal, placing the smartphone market at a record high valuation of $578.9 billion.
But the trend is expected to reverse late next year as the supply network adapts, according to Popal and Wang, potentially causing costs to fall again or at least halting increases.
The semiconductor industry is accustomed to navigating shifts as novel technologies emerge, says Wang. But it might not have anticipated the swiftness of AI demand growth.
“In the semiconductor domain, there will always be a disparity (in supply and need),” he remarked. “This was somewhat unforeseen.”
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