The mobile market had been recovering from a rough patch, but a new hardware shortage is pushing it back toward decline. Memory chips, critical for phones and other devices, are being scooped up by AI firms, and that squeeze will raise prices across the board.
Higher memory costs will hit cheaper phones the hardest, eroding margins and forcing manufacturers to revisit RAM and storage choices this year.
Why memory is the new bottleneck
After a semiconductor crunch that stretched nearly three years starting in 2020 and the added shock of the war in Ukraine, global inflation and supply chain instability finally began to ease. That recovery looks brief. The latest crisis centers on DRAM and other memory components, not silicon fabs or displays.
Major buyers in the AI space, specifically providers of large language models and chatbot platforms, are gobbling up memory at volumes that far exceed traditional device demand. Those platforms are exceptionally memory-hungry, and their purchasing is tightening the market for phones, tablets, laptops, and wearables.
What this means for phone prices and sales
Higher memory prices will translate directly into higher device costs. Analysts expect memory to account for 30 to 40 percent of a phone’s bill of materials under the current pricing pressure.
That will likely push retail prices up and dampen unit sales. The market isn’t in dire collapse yet—the industry sold roughly 1.254 billion phones last year, a 2 percent increase year over year—but the outlook for the current year is weaker because of the cost squeeze.
Budget phones stand to lose the most
Flagship devices typically carry higher margins, so manufacturers can absorb or spread out increased component costs more easily. Midrange and low-end models have far thinner margins, leaving little room for cost absorption.
Expect manufacturers to revert to lower RAM configurations this year. Cheap phones with 8 GB of RAM will be rarer, as brands prioritize cost control by returning to the smaller memory capacities common in earlier years.
Who can shoulder the pain?
Each maker will respond differently. Brands with strong margins or premium positioning can smooth price increases, while others will either hike prices or cut specs to preserve margins.
Apple is not expected to raise prices because of this memory crunch, though other manufacturers may have to. Which companies will successfully spread the cost and which will pass it onto customers remains to be seen.
