KATHMANDU-While consumers are used to high prices for smartphones boasting superior cameras or larger screens, a basic component is about to drive costs even higher: Memory.
Due to the explosive growth of Artificial Intelligence (AI), the global demand for memory chips has shifted drastically, creating a shortage for consumer electronics. According to a recent report by CNN Business, this shortage is expected to make mobile phones significantly more expensive starting as early as next month.
The AI Effect
The root cause of the looming price hike is the aggressive expansion of AI infrastructure. Tech giants like Meta, Microsoft, and Google are racing to build massive data centers to support their AI capabilities. A report by McKinsey & Company projects that global investment in data center infrastructure will reach approximately $7 trillion by 2030.
To meet this demand, major memory manufacturers like Samsung and Micron have pivoted their production lines. They are now prioritizing high-performance enterprise memory for data centers
over the standard memory used in smartphones, tablets, and smartwatches.
“This situation is quite cruel and has affected all sectors,” said Yang Wang, a senior analyst at Counterpoint Research.
Shortage and Price Hikes
The scarcity of consumer-grade memory is already impacting the market. Counterpoint Research data indicates that memory prices are expected to rise by 30% in the fourth quarter of 2025, with an additional 20% increase projected for the beginning of 2026.
Consequently, TrendForce, a semiconductor research firm, estimates that smartphone production costs will rise by 8% to 10% in 2025.
“Demand for AI-driven data centers has grown so high that we are exiting the consumer memory business,” Micron announced earlier this week. Similarly, Samsung executive Jejun Kim warned in October that supply shortages for mobile and PC memory would likely intensify.
Budget Phones Hit Hardest
While flagship phones often have high profit margins that can absorb some cost increases, budget Android phones will face the brunt of this shift.
Nabila Popal, Research Director at International Data Corporation (IDC), told CNN, “It will be almost impossible for companies not to raise the prices of cheap Android phones.” Because profit margins on budget devices are razor-thin, manufacturers have no choice but to pass the cost to consumers.
Market Outlook
The IDC predicts that the global smartphone market could shrink by 0.9% in 2026 due to these shortages. The average selling price of a smartphone is projected to jump from $457 in 2025 to $465 in 2026, pushing the total market value to a record $578.9 billion.
To cope with the volatility, some manufacturers may delay product launches or focus exclusively on high-margin premium models.
However, there is a silver light at the end of the tunnel. Analysts suggest that as the supply chain adjusts to the new AI-centric reality, prices may begin to stabilize or decrease by the end of next year.
