Rising Memory Costs Shape Smartphone Landscape
The escalating expenses associated with memory components, primarily spurred by the surging demands of the artificial intelligence sector, are poised to increase the price of entry-level smartphones by approximately 30 percent.
This trend may compel consumers to either postpone new acquisitions or seek pre-owned devices, as highlighted in a recent report from Jefferies.
According to the analysis, memory costs have surged significantly as the appetite for AI-related applications consumes an ever-greater portion of global supply chains.
By the calendar year 2027 (CY27), it is projected that AI will account for roughly 60 percent of total memory demand.
Concurrently, anticipated capital investments of about USD 1.5 trillion from AI stakeholders within the same timeframe could sustain elevated memory pricing for multiple subsequent quarters. The projection suggests that memory costs may reach their zenith by mid-CY27.
Effects on the Smartphone Sector
The ramifications of increasing component costs are already manifesting among smartphone producers, notably within the budget category.
The report estimates that the cost of memory per unit has ballooned to almost three times its former value, escalating from approximately USD 20 in CY25 to an estimated USD 60-65 presently.
This pressure is particularly pronounced for low-end Android devices priced below USD 200, where memory constitutes about 60 percent of the overall manufacturing expenses.
The report indicates that “a price increase of approximately 30 percent for entry-level phones could lead to postponement of new purchases or a pivot towards used devices,” implying that heightened production costs might influence consumer choices.
In response to surging input costs, manufacturers may curtail the variety of budget smartphone models available and streamline their distribution strategies. Such adjustments are also likely to have repercussions on global smartphone shipment volumes.
Anticipated Market Developments
The report forecasts an annual decline in shipments of about 15 percent, decreasing to 1,067 million units in CY26 and further to 911 million units in CY27.
Although the shipment predictions for both CY26 and CY27 saw slight upward revisions of 5 percent and 3 percent, respectively, the larger market outlook remains pessimistic.
The affordable smartphone sector is projected to endure the most significant downturn, with its global market share diminishing from 42 percent in CY25 to 24 percent in CY26.
Conversely, the segment of smartphones retailing for over USD 600 is anticipated to grow from 29 percent to 38 percent during the same timeframe.
The analysis also underscores ongoing supply chain challenges, with semiconductor shortages identified as a principal obstruction.
To mitigate expenses, manufacturers are contemplating the use of chips that are one to two years old instead of the latest flagship models.
Even if smartphone demand sees a robust resurgence post-CY28, the industry may grapple with reestablishing shipment levels if production capacities are reduced during the current downturn, the report cautions.
Source link: Newsable.asianetnews.com.
