The delicate balance between performance and pricing in smartphone SoCs, driven by economies of scale, is now fracturing.
Over the weekend, Qualcomm issued a price adjustment notice to global customers, announcing a double-digit percentage increase across its entire chip product line starting September 1. This move will impact not only the smartphone and PC markets but also wearable devices like AI glasses and smartwatches.
Notably, prior to Qualcomm's price hike, MediaTek also sent a price increase notice to clients in late June, declaring adjustments to its product pricing. The price increases by these two leading chip companies signal that cost pressures in the global semiconductor supply chain have fully cascaded from upstream manufacturing to chip design leaders and will further spread downstream to end-user markets.
"New flagship mobile chips released this year were already expected to cost more due to advanced manufacturing processes, but the increase will be far greater than anticipated due to the current complex environment," a research and development employee at Xiaomi stated. "A decade ago, you could buy a flagship phone for 1,999 yuan. Now, that might only get you an entry-level device. This year, flagships will likely start at 6,999 yuan."
Even Chipmakers Are Feeling the Strain
The "victims" of AI are not limited to device manufacturers.
Since the start of the year, AI-driven storage price hikes have forced phone makers to cut back and raise prices to avoid losses, leading to a decline in the overall market for two consecutive quarters. Some brands have even temporarily exited the market. This has naturally impacted Qualcomm and MediaTek, whose primary revenue comes from mobile chips.
In its earlier Q4 fiscal 2025 earnings report, revenue growth for Qualcomm's core mobile chip business slowed notably quarter-over-quarter. By Q1 of this year, Qualcomm failed to deliver a satisfactory figure, with revenue of $60 billion, a 13% year-over-year decline.
This is a direct result of the sluggish consumer electronics market and the constraints of the supply chain. In response, Qualcomm CEO Cristiano Amon noted during an earnings call that the mobile phone industry will face dual constraints from DRAM memory supply and pricing over the coming quarters, adding that "the size of the mobile phone market for the entire fiscal year will be determined by memory availability."
Qualcomm's decision to raise prices is a last resort. "They really can't take it anymore," said a chip industry expert. "While chipmakers like Qualcomm were once highly profitable, they've lost the initiative now, and their situation isn't much better than device makers. They're facing dual pressures on revenue and profit."
According to market sources, Qualcomm's price increase takes effect on September 1, the same month its new flagship chip is launched. This will impact the pricing and product strategies of major Android manufacturers as they release their annual new flagship models, leaving them with less than two months of buffer time.
Before Qualcomm, MediaTek, the world's largest smartphone SoC shipper, had already succumbed to pressure. In June, it sent a price increase notice to clients, announcing adjustments to its product pricing. The document stated that the global semiconductor component supply chain continues to face major challenges, including unprecedented component shortages, capacity constraints, extended supplier lead times, and rising raw material and logistics costs, all of which have significantly increased supply costs and impacted the entire supply chain.
In addition to mobile chips, the price increases cover smart hardware chips and communication chips. The premium Dimensity flagship series is seeing price hikes of 10-20%.
This price increase was not unforeseen. At a shareholder meeting in May, MediaTek Chairman Tsai Ming-kai pointed out that the surge in AI computing demand is driving technological upgrades and structural changes in the global supply chain, with several key components already in shortage and seeing price increases. He did not rule out moderate product price adjustments to cope with rising cost pressures, stating that price increases across the supply chain would become the new normal.
The Market Has Not Yet Bottomed Out
Price increases in the mobile chip market have been occurring for several years. However, this time, Qualcomm and MediaTek are not fully in control, and the reasons behind the hikes are more complex.
On one hand, costs are rising due to process node upgrades. In September, both Qualcomm and MediaTek will launch their latest flagship chips, which will move mobile chips fully into the 2nm manufacturing stage. Simultaneously, with capacity constraints, Qualcomm and MediaTek are also competing with AI chip makers for orders, causing cost increases to far exceed previous expectations.
Reports indicate that the unit cost of the upcoming Snapdragon 8 Elite Gen 6 Pro chip is expected to exceed $300, potentially reaching $330, a roughly 20% increase from the previous generation, making it the most expensive mobile SoC product in Qualcomm's history.
Similarly, the Dimensity 9600 Pro's production cost is over 20% higher than the 3nm chip. When combined with storage components, the cost alone exceeds $600, meaning the starting price for this year's flagship devices will be around 6,000 yuan.
On the other hand, the economies of scale in the mobile phone market are failing. A recent report from Counterpoint Research shows that global smartphone shipments in Q2 2026 fell 11% year-over-year as the storage shortage intensifies and becomes a major industry factor, marking the lowest second-quarter level since 2013.
The market downturn has suppressed the overall revenue and profit of upstream chip makers. While the high-end flagship market is less affected, demand for mid-range chips, which drive volume, has declined sharply. Earlier, Qualcomm and MediaTek reduced their shipments of 4nm mobile processors, with a combined cut of 15-20 million units. This price adjustment also includes mid-range chips like the Snapdragon 7 series.
The aforementioned Xiaomi R&D employee noted, "Device makers and chipmakers face the same challenges, but the difference is that chipmakers can rely on high-end products to maintain revenue and profit. Not all device brands can succeed in the high-end market; most rely on mid-to-low-end products for volume. This collective price hike is a heavy blow, but they have no choice but to accept it, as there is no Plan C."
It's worth noting that, in addition to their core business challenges, Qualcomm and MediaTek are also exploring new growth areas like automotive, IoT, and data centers. In Q1, Qualcomm's automotive electronics business revenue reached $1.33 billion, a 38% year-over-year surge, setting a new quarterly record. Its IoT business revenue was $1.73 billion, up 9% year-over-year. However, these new businesses are not yet large enough to offset the decline in the mobile chip segment.
While Qualcomm's and MediaTek's Q2 earnings reports are not yet released, signals from the market suggest that the smartphone SoC business will not be optimistic for either company.
In Q1, smartphone SoC shipments for both Qualcomm and MediaTek saw double-digit declines. Logically, Qualcomm, which focuses on the high-end market, should have benefited from this trend. However, due to factors like Samsung increasing the share of its self-developed Exynos 2600 chip in new flagships and weak performance of Xiaomi's high-end flagships, Qualcomm did not benefit from high-end market demand.
Counterpoint Research Senior Analyst Shivani Parashar stated, "Both Qualcomm and MediaTek are affected by the current memory shortage. It is expected that many OEMs will turn to UNISOC's chipsets to reduce costs."
More concerning is that the smartphone SoC market has not yet bottomed out. Counterpoint expects smartphone SoC shipments to decline by double digits in Q2, with the situation potentially worsening in the second half of the year. Recovery to normal levels is not expected until at least early 2028. The ongoing memory shortage is not only affecting new product development for smartphone OEMs and SoC suppliers but also prompting them to optimize their product portfolios.
Device Makers Resist, Refusing to Be Passive Buyers
Unlike the continuous price increases for memory chips, the price adjustments by Qualcomm and MediaTek are more reflective of the challenges faced by device manufacturers. They are the result of multiple factors, not an isolated business decision. However, from the perspective of device makers, the repeatedly stacked cost pressures have become unbearable, and they are no longer willing to passively absorb them.
Earlier, it was reported that several domestic phone brands rejected Samsung Electronics' Q3 storage product pricing, even though the increase was "only" 20%, far below the previous 90%. They still refused to accept it.
This is understandable. Compared to the same period last year, the cumulative cost increase for storage alone is nearly 300%, with storage's share of total phone material costs rising from 10-15% to over 30%. However, due to weak downstream market demand, phone makers initially had to absorb these rising costs themselves. Eventually, they were forced to raise prices as they were losing money on every unit sold.
But the mass market is highly price-sensitive, and price increases only further suppress the willingness to upgrade, accelerating the decline in shipments and eroding manufacturers' overall revenue and market share, creating a vicious cycle. To balance costs and prices, some manufacturers have started using chips from two years ago and making cuts in areas like imaging and batteries.
"Now that SoC chip prices are rising, no one is happy. However, considering the need to compete for flagship launch windows, I think most manufacturers will accept the increases initially. The rest will either delay their launches or have smaller initial inventories. It all depends on the final negotiation outcome. If prices continue to rise like memory, that won't be sustainable," the Xiaomi R&D employee said.
Under immense pressure, phone makers have finally decided to fight a "cost defense war." The ultimate outcome of this game will not be a complete victory for one side, but a redistribution of profit and a restructuring of the supply chain ecosystem.
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