NEW DELHI: Thinking of buying a new smartphone? You might want to hurry!Artificial intelligence has already shaken up your work life, changed your daily task flows and even sparked conversations about jobs and the future of work. Now, it is about to hit your budgets.The AI boom could soon make buying a new smartphone more expensive, particularly if you are eyeing a budget device. Rising memory costs, fuelled by the artificial intelligence industry’s growing appetite for components, could push prices of low-end smartphones up by around 30 per cent, forcing buyers to either postpone their upgrades or consider second-hand phones, according to a report by Jefferies.
AI’s appetite for memory is driving up costs
The growing demand for memory components from AI companies is putting pressure on global supplies, with the technology expected to account for around 60 per cent of memory demand in CY27. The spending plans of AI players could make matters worse. These companies are targeting capital expenditure of around $1.5 trillion in the same year, which could keep memory prices elevated for several more quarters.The impact is already showing up in the cost of smartphone components. According to Jefferies, memory prices are expected to peak by mid-CY27, but manufacturers are already dealing with a sharp increase in costs.“Memory cost per unit is likely to have surged ~3x, from est $20 in CY25 to est $60-65 now,” the report said.
Budget smartphones could take the biggest hit
If you thought rising memory costs would affect all smartphones equally, the affordable segment has a bigger problem. For Android smartphones priced below $200, memory accounts for around 60 per cent of the total bill of materials, making these devices particularly vulnerable to price increases.Manufacturers may have little choice but to pass on some of the higher costs to buyers. The report warned that “a price hike of ~30% in low-end phones could defer new purchases or trigger second-hand affordable purchases”.That could mean consumers putting off their next smartphone upgrade or looking at pre-owned devices instead. Manufacturers, too, may have to rethink their affordable offerings by reducing the number of lower-priced variants and downsizing their distribution channels to manage rising input costs.
Affordable phones lose market share
The rising cost of components could also weigh on the overall smartphone market. Jefferies expects global smartphone shipments to decline by 15 per cent annually to 1,067 million units in CY26 and 911 million units in CY27.While the report has slightly raised its shipment forecasts for CY26 and CY27 by 5 per cent and 3 per cent, respectively, the broader outlook remains weak.The affordable segment is expected to bear the biggest brunt. Its share of the global smartphone market could fall from 42 per cent in CY25 to 24 per cent in CY26. Meanwhile, the share of smartphones priced above $600 could rise from 29 per cent to 38 per cent over the same period.
Older chips could replace the latest processors
Memory is not the only component creating headaches for smartphone manufacturers. The report identified semiconductor shortages as the biggest supply-chain bottleneck, adding to the pressure on the industry.To contain costs, manufacturers are considering using chips that are one to two years old instead of the latest flagship processors.The challenges could also have a longer-term impact on the industry. Even if smartphone demand recovers rapidly from CY28, manufacturers may struggle to restore shipment levels if they reduce production capacity during the current slowdown, the report cautioned.
