Smartphone buyers may need to brace themselves for higher prices this year. Carl Pei, CEO of Nothing, has explained that rising demand for AI and memory chips is set to reshape the smartphone market, making devices more expensive.
A Decade-Long Trend Comes to an End
In a recent post, Pei stated that 2026 will mark a significant shift in the consumer electronics market, particularly in smartphones. For the past 15 years, the industry relied on a simple assumption: component costs, such as memory (RAM) and displays, would continue to decline. This allowed manufacturers to offer better hardware year after year at the same or slightly higher prices. However, this trend is now coming to an end.
Why Smartphone Prices Will Rise
The surge in AI applications has drastically increased the demand for memory chips, which are now essential not only for smartphones but also for AI data centers. Major tech companies have been pre-booking silicon wafers for years to meet AI demands. For the first time, smartphones are directly competing with AI infrastructure for these crucial components.
Memory Chips Become the Most Expensive Component
In some cases, the cost of memory chips has already tripled. As demand continues to outstrip supply, memory chips are emerging as the costliest component of smartphones. Analysts predict that memory modules that were priced under $20 (around ₹1,800) last year could exceed $100 (around ₹9,000) for top-tier models by the end of 2026.
A Market Contrary to Expectations
Traditionally, high demand meant wider availability and lower prices. But memory chips are defying this logic. Soaring demand, supply bottlenecks, and price hikes by chip manufacturers are pushing up smartphone production costs.
Manufacturers Face Tough Choices
Pei explained that smartphone companies now have two options: either increase prices—potentially by 30% or more—or reduce specifications. He confirmed that Nothing’s own phone lineup will also see price hikes.
The End of the Specifications Race
Pei added that the era of competing solely on specs is ending. Going forward, user experience will become the defining factor, and Nothing aims to lead this transition. 2026 is poised to be the year when smartphones are distinguished less by raw specifications and more by the overall user experience.
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