Surging demand for memory from AI data centres is squeezing handset makers, putting pressure on margins and threatening higher prices, downgraded specifications and fewer affordable models.
The surge in memory prices, driven by demand from AI servers, is beginning to reshape the smartphone market as manufacturers face higher component costs and weaker room to absorb them. Counterpoint Research said the pressure is falling hardest on entry-level handsets, where profit margins are already thin and price competition leaves little scope to pass on higher bills to buyers. Premium phones, by contrast, have more flexibility to absorb cost increases through higher retail prices, which may accelerate the shift towards more expensive devices.
The problem is not limited to smartphones. Business Standard reported earlier this year that AI infrastructure is drawing memory supply away from consumer electronics, pushing up prices for phones, PCs and televisions. TrendForce has also warned that large memory makers have prioritised capacity for high-bandwidth memory and high-end server DRAM, leaving less room for general-purpose and consumer-grade supply. That imbalance, it said, is likely to persist because foundry and packaging capacity remains constrained, making a near-term easing in memory prices unlikely.
For handset makers, the effect is practical as well as financial. Memory is a major bill-of-materials item, and when its price rises, manufacturers must choose between lower margins, higher retail prices or reducing specifications. TrendForce said brands may need to downgrade specifications or delay upgrades to control costs, particularly in low- and mid-tier devices. TechCrunch reported in February that analysts at IDC and Counterpoint expected global smartphone shipments to fall sharply in 2026 as the memory squeeze ripples through the market.
Samsung Electronics is exposed on both sides of the trend. A stronger memory market can support its semiconductor earnings, but the same price rise raises the cost of making phones. The result may be a wider industry shift towards a more premium product mix, with lower-end devices becoming harder to sustain unless suppliers adjust configurations, trim line-ups or accept weaker profitability. If the current memory supercycle persists, the impact may extend beyond component pricing and into the shape of the smartphone market itself.
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