Smartphone Price Hikes Reflect AI-Driven Memory Chip Shortage

Global memory chip prices are climbing steadily, and the ripple effects are now hitting the consumer electronics supply chain. After Oppo and OnePlus initiated price increases on March 10, Vivo and iQOO followed on March 16, announcing increases of 500 to 1,000 yuan ($70 to $140) on select models starting March 18. These moves signal a significant wave of smartphone price adjustments in China, driven by pressures on upstream component costs.

AI Demand Fuels Memory Imbalance

The current price increases are largely attributed to the expanding demand for AI infrastructure. According to TrendForce, global AI server shipments are projected to grow by more than 28% year-over-year in 2026, substantially increasing demand for DRAM and NAND flash memory.

Micron Technology has stated that data center and AI applications are key growth drivers for the industry, even as SK Hynix and other chipmakers have reported strong AI-related demand and tightening supply for high-conclude products. Industry analysts believe that memory manufacturers are prioritizing high-bandwidth memory (HBM) and server-related products due to higher margins, which is squeezing the supply of consumer-grade memory chips and driving up prices. TrendForce also anticipates that memory prices will continue to rise throughout 2026.

Cost Pressures Impact Smartphone Makers

As memory prices increase, smartphone manufacturers are facing growing cost pressures. Memory chips now represent a larger portion of a phone’s bill of materials, making them a critical factor in device price adjustments. Counterpoint Research notes that rising memory costs are reducing margins for mid- and low-end models, prompting some vendors to increase prices or adjust their product mix.

Contract prices for Dynamic Random Access Memory (DRAM) and NAND flash have been increasing since the second half of 2025 and continue to trend upward in 2026, further increasing the financial burden on device manufacturers.

Industry Landscape and Consumer Response

Amid these rising costs, major smartphone makers are focusing on premiumization and product mix optimization, while smaller brands face greater challenges. Honor has maintained the starting price of its foldable Magic V6, but higher-storage variants have seen price increases. Xiaomi President Lu Weibing has indicated that memory cost pressures are likely to persist.

According to IDC, the global smartphone market recovery remains uncertain, and average selling prices are expected to rise. The industry may experience pressure on shipment volumes even as prices increase, with market share continuing to consolidate among leading players. Xiaomi has not yet announced any price increases.

Consumers are becoming more cautious in their purchasing decisions in response to rising memory prices. However, government subsidies in China are providing some relief. Under China’s consumer electronics subsidy program, smartphones priced below 6,000 yuan ($830) are eligible for a subsidy of up to 15% of the retail price, capped at 500 yuan ($70) per device.

Despite these measures, the cost pressure remains substantial. With memory prices rising sharply and global smartphone shipments projected to fall by around 13% in 2026, according to IDC, higher prices are increasingly impacting consumer demand. Some consumers may accelerate purchases to avoid further price increases, while others may delay purchases in anticipation of potential easing in memory supply after 2027.