What the memory chip crisis is and why it matters
The memory chip crisis in smartphones is a global supply squeeze where AI data centers consume a growing share of DRAM and NAND manufacturing capacity, leaving fewer affordable chips for phones and forcing average prices higher while low-cost models disappear from the market. This is not a classic tech fad or a short-term glitch caused by factory fires or shipping delays. AI data centers from major cloud providers are ordering memory in huge volumes and at higher margins than phone brands can match, creating a structural memory supply crisis. IDC expects global smartphone shipments to fall 12.9% in 2026 as supply constraints collide with shrinking affordability. At the same time, IDC forecasts the average selling price to hit USD 523 (approx. RM2400), turning what used to be a mid-range price into the new normal and pushing many buyers out of the market.
How AI data centers are starving smartphones of memory
AI data centers impact phone prices because they buy from the same factories that build mobile DRAM and NAND, even though server memory and phone memory are different products. Chipmakers are shifting wafer capacity toward high-bandwidth memory for AI clusters, where clients are willing to pay far more per gigabyte. According to Counterpoint Research, mobile DRAM prices have risen close to 70% since early 2025, while NAND storage has nearly doubled. IDC notes that DRAM supply growth in 2026 will fall well below historical norms, amplifying the memory supply crisis. With limited cleanroom space, every wafer used for an AI server can represent hundreds of phones that never get built. The result is a global memory chip shortage that leaves phone makers fighting over reduced supply and passing higher costs through to buyers.
Why smartphone prices are rising 6–25%
Smartphone prices are rising 6–25% because memory chip prices have nearly tripled since early 2025 and now claim a bigger slice of each device’s cost. Memory used to account for around 10–15% of the bill of materials in many mid-range phones; it now exceeds 20% in that tier. Budget models under USD 200 (approx. RM920) are hit hardest, with memory making up 25–30% of their total component cost. Counterpoint Research estimates that budget devices face 20–30% price pressure, mid-range phones 10–15%, and flagships 6–9%. This is why many buyers see smartphone prices rising even when screen sizes and cameras look unchanged on paper. Manufacturers can either raise prices, cut memory capacity, or both; all three options mean consumers get less value per dollar than they did only a couple of years ago.
The slow extinction of sub-USD 200 budget phones
The budget phone extinction is most visible under USD 200 (approx. RM920), where there is almost no profit margin left once memory costs are paid. IDC reports that the sub-USD 100 (approx. RM460) segment alone covers roughly 171 million devices each year, and warns that this tier faces outright extinction even after memory prices stabilize. In this bracket, memory chips can represent 25–30% of the total hardware cost, so a 70% jump in DRAM and a near doubling in NAND make many models impossible to sell without a loss. Some brands are cutting production, others are quietly downgrading RAM and storage so the sticker price stays put while the phone gets weaker. This budget squeeze is a key reason IDC expects smartphone shipments to drop 12.9% in 2026 as the most affordable options vanish.
Who survives the memory supply crunch—and what buyers can expect
The memory supply crisis is reshaping the competitive landscape as much as it reshapes prices. Larger brands that can secure long-term memory contracts are consolidating share, while smaller low-end players cut lines, merge, or exit. Samsung’s recent flagship launch added USD 100 (approx. RM460) to the price while raising base storage, a move that partly masks higher memory costs. Apple has absorbed more of the hit so far but warns that future iPhones may feel the same pressure. Google is rumored to lower RAM in some models, trading performance headroom for lower costs. For buyers, this means fewer true budget choices, mid-range phones creeping closer to old flagship prices, and more compromises on RAM and storage. Until new high-bandwidth memory capacity comes online, smartphone prices rising will remain the norm, not the exception.