The AI chip shortage could raise smartphone prices — new research spells out by how much

A recent analysis by Counterpoint Research has revealed that an ongoing shortage of memory chips, driven by the demands of artificial intelligence (AI) companies, is likely to lead to increased smartphone prices by 2026. The research highlights a potential decline in smartphone shipments, which may drop by 2.1% compared to earlier forecasts that anticipated steady or even positive growth. While shipments reflect the number of devices dispatched to retail channels rather than direct sales, they serve as an essential indicator of market demand. Counterpoint predicts that the average selling price of smartphones could rise by 6.9% year-on-year in 2026, a significant increase from a previously expected 3.6% rise. This shift is attributed to specific chip shortages and disruptions within the semiconductor supply chain, which continue to escalate component prices. The global expansion of data centers has heightened the demand for systems designed by Nvidia, which relies on components from major memory chip suppliers SK Hynix and Samsung. A crucial type of memory known as dynamic random-access memory (DRAM), essential for both AI data centers and smartphones, has seen prices soar this year due to supply constraints. Counterpoint's report indicates that the production cost for low-end smartphones, priced under $200, has surged by 20% to 30% since the year began. For mid-range and high-end devices, the cost has increased by 10% to 15%. The analysis also warns that memory prices may increase by an additional 40% through the second quarter of 2026, potentially raising the bill of materials (BoM) costs by 8% to over 15% above current elevated levels. These rising component costs are expected to be passed on to consumers, thereby contributing to the increase in average selling prices. MS Hwang, the research director at Counterpoint, noted that companies like Apple and Samsung are better equipped to navigate these challenging conditions in the coming quarters. In contrast, competitors with less flexibility may struggle to balance market share with profit margins, particularly Chinese smartphone manufacturers targeting the mid-to-lower end of the market. To cope with these financial pressures, some smartphone manufacturers might resort to downgrading components such as camera modules, displays, and audio systems, or even reusing older parts. Additionally, they may seek to encourage consumers to opt for pricier models to offset rising production costs.