Chip Crunch: AI Drives Phone Prices to New Peaks

Artificial intelligence has turned the world’s memory chip supply into a bottleneck, pushing smartphone prices higher than ever.

According to a recent study by a Boston‑based research firm, the shortage of memory chips is expected to crush phone makers who can no longer sell devices under $100.

• Projected price increase: 14% jump in the average price of smartphones this year, reaching $523 on average.
• Sales forecast: A 12.9% decline in 2026, dropping to just over a billion units – the lowest figure in more than ten years.

Root Cause: The AI Boom

Data centers, which rely heavily on memory chips, have outpaced consumer electronics in demand. Major chip producers in Asia are now prioritising AI over phones, laptops and gaming consoles.

• Large firms: Apple and Samsung may weather the storm.
• Smaller Android‑based manufacturers: Likely to feel the squeeze most sharply.

The report notes that no return to normal is expected for vendors or buyers.

Shift from DRAM to HBM

Memory chips, once a low‑margin business, have become crucial for AI’s growth. The need for more processing power and larger storage has shifted focus from standard DRAM to high‑bandwidth memory (HBM) used in data centers.

• Price impact: Both DRAM and HBM prices have nearly doubled since the last quarter.
• Industry response: Electronics makers are reducing memory usage or targeting premium markets.

Market Leaders and Production Capacity

The top three suppliers – SK Hynix, Samsung and Micron – have seen their stocks hit record highs, and production lines are nearly full.

Outlook

Experts predict the shortage will linger into next year. High‑profile leaders, including a prominent electric‑vehicle CEO, have highlighted the risk and suggested building in‑house chip facilities to secure supply.