Why Smartphone Prices Could Rise in 2026

AI is bidding memory away from phones—and consumers will pay the difference

Jan 15, 2026

For the better part of a decade, the floor price for a usable smartphone generally trended down. However, in 2026, thanks to a tightening RAM market, smartphone pricing could hit a giant wall, with prices expected to rise across the board.

The smartphone industry is currently grappling with a ‘value paradox,’ characterized by lowering shipment volumes amid all-time high market values due to price hikes. Market forecaster IDC expects shipments to decline by 0.9% in 2026, while Counterpoint expects a steeper 2.1% drop. While forecasters disagree on the depth of the unit decline, they do agree that smartphone prices are expected to rise as Bill of Materials (BOM) costs go up. IDC points out that the average selling price of smartphones could climb up to $465 this year.

At the heart of this issue is the availability of Random Access Memory (RAM), an essential component in every computing device. Once a commodity in steady supply, RAM has recently become a bottleneck for smartphone production, with prices surging as manufacturers shift their priorities toward the AI server market.

As tech giants scale the data centers necessary for AI, they are rapidly absorbing the global memory supply—and outspending smartphone brands to do it. AI-grade components offer far higher profits, so manufacturers are prioritizing those orders over mobile contracts. The result is a price reaction in the phone-grade memory market, as supply fails to meet demand.

The Memory Squeeze: How AI Rewrites the Smartphone Bill of Materials

This ongoing RAM shortage is a zero-sum game of wafer allocation. The high-bandwidth memory (HBM) that powers AI servers is incredibly wafer-intensive and requires complex manufacturing. According to EE Times, to produce a single gigabyte of HBM, manufacturers must consume roughly three times the raw silicon wafer capacity required for the phone-grade DRAM (dynamic random-access memory). In essence, producing a single AI chip consumes the same amount of wafer capacity that would otherwise yield three smartphone chips.

Advanced packaging is another primary bottleneck for HBM supply because the technical complexity of vertically stacking DRAM dies leads to low manufacturing yields. As a consequence, wafer production capacity cannot simply be increased overnight, pitting AI against the smartphone sector in a tug-of-war for the same limited hardware resources.

The shortage is further exacerbated by the bottom line. Semiconductor giants have a larger financial incentive to prioritize AI data centers over smartphones due to HBM yielding significantly higher profit margins. Hence, production lines are pivoting to fulfill the orders of AI clients first, leaving smartphone OEMs to engage in a bidding war for what remains.

This so-called ‘memory squeeze’ is already being felt in the market today. As noted by TrendForce, phone-grade DRAM prices saw a fourfold increase in 2025. For example, 4GB DDR4x chips—the baseline for many entry-level devices—have reportedly soared from $7 at the start of 2025 to more than $30 in mid-November.

A jump of this magnitude impacts the already razor-thin margins of the entry-level smartphone segment and potentially the midrange segment as well. While smartphone OEMs tend to swallow small cost increases in BOM, spikes like these are almost always passed on to the consumer.

Impact on Shelves

Going by market forecasts, the impact of the RAM shortage is different for each smartphone price segment.

The hardest hit is the entry-level segment ($200 or less), where BOM costs are expected to climb by 20% to 30% this year, according to Counterpoint Research. For these low-margin releases, a $20 cost increase can be existential, as it cannot be easily absorbed by the manufacturer. Moreover, the high price elasticity of this segment means that passing these costs onto the consumer through price hikes would likely lead to a significant drop in sales.

To preserve profitability, OEMs are expected to consolidate their offerings, culling underperforming models in this price segment. These efforts could also be paired with delayed launches as OEMs wait for component prices to stabilize, notes Counterpoint Research. For the consumer, this strategic retreat could lead to a more limited selection of devices in the sub-$200 segment.

Analysts also expect OEMs to protect their margins in the midrange segment ($200–$500) by engaging in ‘spec shrinkflation’, a practice that involves swapping out premium components for lower-cost alternatives. IDC predicts new models in this segment will revert to 4GB or 6GB RAM configurations as BOM costs climb by as much as 15%.

These specification compromises may extend beyond memory modules, though the exact components targeted for cost-cutting remain to be seen. Ultimately, analysts warn that consumers may soon find themselves paying more for hardware that offers less than previous generations.

Among the three market segments, the premium segment (above $600) is best positioned to absorb the rising costs from the RAM shortage. Unlike entry-level and midrange releases, flagship smartphones command higher profit margins, giving manufacturers more breathing room to meet their bottom line. This resilience is reflected in recent sales data. Apple, for example, saw its market share in China push to 20% in November 2025, suggesting that high-end buyers are far less sensitive to the price adjustments brought about by supply chain constraints.

One thing to note: Much like AI data centers, the integration of on-device AI features in smartphones is also driving up memory demand. Samsung, for instance, plans to roll out its own AI software across over 800 million units by 2026. However, despite the massive consumer scale of smartphones, AI data centers continue to take precedence in the RAM supply chain.

Who Gets Squeezed in Asia

Putting all this into perspective, Chinese OEMs are expected to bear the brunt of these supply chain pressures, as their portfolios remain heavily anchored on entry-level devices, which operate on small margins. With BOM rising, these manufacturers may no longer be able to absorb cost increases without incurring some losses.

As a result, they are expected to execute a tactical pivot by intentionally steering consumers toward higher-margin premium offerings. This strategic shift will likely take shape in an overhauled retail landscape dominated by high-end models. Marketing budgets and store displays will increasingly prioritize these more expensive models over their midrange and entry-level counterparts.

Meanwhile, South Korean chipmakers are reaping large financial windfalls as they take advantage of the AI-driven supply-demand imbalance. This ‘upside’ is driven by two factors. First is the lucrative margins of HBM sold to enterprise clients.

Second is a rare ‘price inversion’ where the resulting shortage of standard phone-grade DRAM has allowed chipmakers to raise their prices. With significant fabrication capacity focused towards meeting HBM demand, chip makers are inadvertently strangling the supply of phone-grade DRAM. They can then capitalize on that supply disruption and OEMs’ desperation to secure components to hike prices of phone-grade DRAM, effectively turning them into high-margin assets. So much so that experts at KB Securities think that based on the current trend, the profitability of phone-grade DRAM could eventually rival, if not surpass, HBM in the short term.

A ‘spec shrinkflation’ in the midrange segment could trigger a significant change in consumer behavior: they will move from traditional retail toward the secondary and refurbished markets. As new 2026 midrange models revert to lesser RAM and lose their premium features, value-minded buyers will realize that a refurbished 2024 flagship offers a more durable build quality, more powerful optics, and better long-term performance for a similar or even lower price. According to Tech in Asia, this value gap can make the second-hand market grow from a niche alternative into a primary choice for some consumers this year.

For instance, India’s used smartphone market is projected to reach a $10 billion valuation by 2026, according to a 2022 report by Redseer Strategy Consultants. This trajectory aligns with IDC’s data showing that the country traded 20 million used smartphones in 2024, representing a 9.6% year-on-year increase. The growth is driven by a shift toward second-hand premium models—highlighted by a surge in Apple’s pre-owned shipments in 2025—as consumers increasingly favor older flagship hardware over new, plastic-bodied midrange models.

A similar upward trend is seen in the secondary smartphone market across Southeast Asia, which recorded a 5% year-on-year growth in the first half of 2025, according to Counterpoint Research. Within this region, Technavio identifies Indonesia as a primary revenue engine, noting that it has emerged as one of the top contributors to the broader Asia-Pacific market.

This trend is only expected to intensify as ‘spec shrinkflation’ further diminishes the value proposition of new midrange releases.

What To Do About It

Rising smartphone prices provide a compelling reason for consumers to reevaluate the traditional upgrade cycle. With hardware gains expected to slow this year, the definition of ‘value’ shifts from owning the latest release to prioritizing long-term utility.

If you’re a smartphone buyer shopping under the $500 mark, you can look at RAM as a key metric for performance: avoid anything with 4GB of RAM unless the device is strictly a secondary backup. In the current app ecosystem, 4GB is increasingly limiting for heavier multitasking and on-device AI features, so buyers should treat it as a compromise.

Meanwhile, for OEMs, the era of masking inefficient software with sheer hardware power is ending. As ‘spec shrinkflation’ disrupts the smartphone industry this year, the competitive battleground shifts towards software optimization and architectural efficiency.

This is why moving forward, integrated AI features and intelligent software ecosystems will likely hold more weight for consumers than raw specs. In this new landscape, a ‘smart’ phone will no longer be defined by the size of its memory chip, but instead by the sophistication of the algorithms that allow it to do more with less. And by shifting focus to software-powered longevity, OEMs can attempt to justify rising price points even as physical components hit a plateau.

In short, when hardware headroom stops getting cheaper, software optimization becomes the differentiator.

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