Get ready to pay more for your next phone , and you can point a finger at the artificial intelligence segment. According to new research from Counterpoint, the massive global appetite for AI data centers is indirectly hitting the average consumer, raising the cost of key components —mainly memory—and pushing smartphone prices higher across the board .
The core issue lies in memory chips, specifically DRAM. This component is vital for both next-generation AI servers (like those running Nvidia systems) and our phones. Because the demand from data centers—where profit margins are higher—is soaring, supply for the standard smartphone market is tightening. Unsurprisingly, this scarcity is causing memory prices to spike.
AI server demand Is driving up global phone prices
The analysts predict a tough market for 2026. Global smartphone shipments are now expected to shrink by 2.1%, reversing previous forecasts for growth. This is a direct reaction to the rising cost of making phones.
We’re already seeing the component cost (the bill of materials, or BoM) rise significantly. Low-end phones (under $200) have been hit the hardest, seeing production costs jump 20% to 30% this year. Mid-to-high-end devices haven’t escaped, with BoM increases between 10% and 15%. Counterpoint warns that memory prices could climb another 40% through the first half of 2026, forcing those BoM costs even higher.
Smartphone Shipment YoY Growth Forecasts and Revisions, 2026. Source: Counterpoint Research
At the end, big tech brands will pass these costs to the buyer. Counterpoint expects the average selling price (ASP) of all smartphones to jump by 6.9% in 2026. This is significantly higher than originally predicted.
Who will survive the component crunch?
Not all manufacturers face the same pressure. Research suggests that giants like Apple and Samsung are best positioned to navigate the component shortage and high prices. Their scale, broad product lines, and strong presence in the premium market allow them more flexibility to absorb costs and manage profit margins.
The pressure will be toughest on smaller brands. This is especially true for those focused on the mid-to-low-end market, such as Chinese manufacturers. To cope, some companies are already making tough choices. We are starting to see manufacturers downgrade other components—like camera modules, displays, or audio features. Some are even reusing older parts to offset the skyrocketing memory costs.
To tackle the hurdles, manufacturers will likely try to restructure their portfolios. They may push consumers toward more expensive “Pro” variants. These offer higher profit margins, so the impact of the rising memory costs is relatively smaller. Be that as it may, consumers can expect tighter wallets and, potentially, slightly lower specs on upcoming phones. If you were thinking about upgrading, perhaps this is a good time to do it.
