The great AI memory squeeze is driving down global handset demand, as experts have been predicting all year. The cost of memory has now overtaken every other factor as the single biggest drag on the smartphone industry.
But it is weighing especially strongly on the budget brands, some of which may struggle to survive, while also opening a door of opportunity for premium players like Apple and Huawei.
Consumers are only just starting to feel the pain. Memory prices began ramping up in Q4 last year, but the price rises have only just begun.
The sales and shipment numbers for the second quarter show demand has already sunk and is forecast to go much lower by the end of the year. Worldwide shipments dropped 11% to their lowest level in 13 years, according toCounterpoint Researchnumbers.
It said DRAM and NAND prices had escalated due to memory suppliers prioritizing AI data centers over consumer products, “forcing OEMs to pass rising Bill of Materials (BOM) costs onto consumersices.”
Real impact is coming
Jusy Hong, senior research manager for smartphones at Omdia (a sister company to Light Reading), says the memory cost hikes in the first half had not yet been fully reflected in handset prices. The cost of memory had increased more than 200% in Q1 and this was now blending into the manufacturing stage.
“The real impact is coming in the second half,” he told an online forum Friday. “We’re expecting the smartphone ASP [average selling price] in Q3 will increase sharply and even steeper than the ASP increases over the past years,” he added. The price of memory “will continuously increase” in the following quarters, and might even top 300%.
In terms of sales in the marketplace, it’s the low-end segment that is right now taking the hit. In India,where shipments contracted by 10%in the second quarter, demand for smartphones costing less than 15,000 Indian rupees (US$180) plummeted 45%.
In China,while total smartphone shipments fell by just 2%, virtually all of the top ten brands suffered a drop in both sales and market share. The exceptions were the premium brands, Huawei and Apple. Huawei grew 19% year-on-year, boosting market share to 23%, while Apple, the no. 2, improved sales by 24% and grew its share to 18%.
Globally it was Samsung and Apple that bucked the trend, growing shipments and increasing market share by 2 and 4 percentage points respectively, Omdiasaid. It noted Apple had achieved its best second-quarter performance ever, aided by the new iPhone 17 and the company’s command of the supply chain, which enabled it to maintain price levels while most competitors were forced to hike prices.
Huawei had a similar story in China, where its supply chain strength also allowed it to resist raising prices. Domestic rivals including Xiaomi and Oppo have had to cut forecasts multiple times due to the cost and difficulty in acquiring memory chips.
Huawei is the only big Chinese smartphone brand expecting to increase shipments this year. According to a Nikkei Asiareport,Huawei has hiked its annual shipment target by 20%, aiming to ship 60 million devices in 2026.
