Since the second half of last year, memory chips have entered an epic price surge, with consumer-grade memory module prices skyrocketing over sixfold at one point, earning them the title of the most value-preserving financial product currently available.
The explosive demand for artificial intelligence infrastructure has rapidly exhausted the production capacity of the three major memory chip manufacturers: Samsung, Micron, and SK Hynix. As early as October last year, SK Hynix indicated that its production capacity for DRAM, NAND Flash, and HBM product lines for 2026 was fully booked. Similarly, the HBM capacity of Samsung and Micron has also been completely sold out.
HBM memory used in AI chips offers higher profit margins, naturally giving it higher priority in production allocation. This has led to renewed supply constraints for consumer-grade products, which are gradually impacting downstream industries. The biggest victim of the memory chip price hike has emerged: low-end smartphones. Transsion, known for its cost-effectiveness, relies heavily on mid-to-low-end models for its shipment volume and was among the first affected by the price increases. In the third quarter of last year, Transsion saw revenue growth of 22.6% but a significant 11% drop in net profit, with gross margin shrinking by two percentage points. While single-quarter performance is heavily influenced by new model launches in that period, even based on full-year guidance, Transsion is projected to see both revenue and profit decline in 2025, with net profit halving. Consequently, its global smartphone ranking has dropped from fourth place into the "others" category.
If Transsion faces such challenges, the situation for other manufacturers' mid-to-low-end models is可想而知. Based on various market reports, major smartphone makers are inclined to postpone new releases for low-price product lines and shift their focus to more profitable high-end models. Earlier this year, Meizu announced the cancellation of the Meizu 22 Air launch plan, directly citing the impact of memory price increases. Subsequently, supply chain sources indicated that several smartphone brands, including Xiaomi, OPPO, vivo, and Transsion, have reduced their 2026 whole-device order volumes by 10%-20%, with mid-to-low-end models unanimously being the primary focus of these adjustments. It seems that during every inflationary period, the most severe impact falls on the bottom tier.
An Expensive Supporting Role The reason why memory chip price hikes are detrimental to mid-to-low-end smartphones lies in their unique positioning: an essential but non-core rigid cost. It is a rigid cost because modern electronic products, including smartphones, fundamentally rely on memory and storage chips; they can use less, but cannot do without them. Its non-core importance stems from the fact that it is not a key component determining the functional experience of a phone; it is more like a supplementary element, a supporting actor. The core elements defining a phone's low, mid, or high-end status are the screen, camera, and processor. Taking Xiaomi's product line as an example, models from the mid-range Redmi Turbo 4 to the high-end flagship Xiaomi 17 Ultra may both offer a 12GB+512GB configuration. However, the price difference between models with the same storage configuration can reach 4,700 yuan. In other words, storage is the aspect where the gap between low-end and high-end smartphones is smallest. It is akin to the soda in a KFC meal combo; you can choose small, medium, or large, but the real value of the meal is determined by the burger and fries.
Although smartphone brands are currently struggling with price hikes, back in 2022, the memory market experienced a price collapse due to internal challenges (overcapacity) and external pressures (weak demand). Smartphone manufacturers (except Apple) widely championed "storage equality," generously offering high configurations, with 512GB/1TB budget phones becoming commonplace. But times have changed. The current surge in memory prices has exposed the biggest operational weakness of mid-to-low-end phones: poor cost flexibility. The development logic for most consumer electronics typically involves first confirming the price range and target profit margin, then selecting various components and sensors based on the cost. With the price fixed, choosing components becomes a game of allocating limited resources according to priority. Specifically for smartphones, high-end models have prices built up by piling on top-tier components; costs are high, but profit margins are larger. Low-end models have prices cut down by eliminating non-essential components and economizing on essential ones, thereby squeezing out limited profit space. Therefore, in the cost structure of low-end models, the proportion of unavoidable "rigid costs" is inherently higher. Under these circumstances, if a smartphone manufacturer absorbs the increased memory costs internally while keeping the selling price unchanged, high-end models have more room to maneuver, whereas the already tight profit margins of low-end models would be directly sacrificed. If the manufacturer passes the full memory cost increase onto the selling price, low-end models are also the hardest hit. According to TrendForce data, the memory cost for a 12GB+256GB iPhone Pro Max accounts for about 10% of the total Bill of Materials cost. Based on research机构 estimates of a BOM cost between 2,910 and 3,829 yuan, the memory cost is approximately 300 yuan. Assuming memory chip prices rise by 50%, the storage cost for a 12GB+256GB configuration would increase by about 150 yuan. The iPhone Pro Max is priced at 9,999 yuan. Even if the entire 150 yuan increase is reflected in the price, the difference between 10,149 yuan and 9,999 yuan might be negligible for Apple users, potentially offset by a minor platform promotion. The lower a consumer product's price point, the broader its consumer base, and the more price-sensitive its audience becomes. Applying the same storage cost increase to a model priced around 1,500 yuan, a 150 yuan hike could deter many potential buyers. For smartphone brands, high-end models might mean earning slightly less, but for low-end models, the economics become increasingly unfavorable, making it preferable to suspend the product line until memory prices stabilize. For the Redmi K90 series launched by Xiaomi last October, the standard version's price increased by 300 yuan compared to the previous generation. The price difference between the 12GB+256GB and 12GB+512GB storage variants reached 600 yuan. In contrast, for the Turbo 4 Pro launched in April of the same year, the price difference between the two storage variants was only 400 yuan. Faced with the phone's price increase, Lei Jun had to post on Weibo acknowledging that "memory prices have risen too much" and announced a 300 yuan price reduction during the first sales month. If a Porsche gets more expensive, likely buyers will probably still buy it. But if a base model Nissan Sylphy increases in price, potential buyers might reconsider, thinking about being the only genuine leather in the car, and temporarily postpone their purchase plans.
A Long Winter The AI infrastructure demand is squeezing memory production capacity, shifting power to the suppliers and creating significant supply chain management chaos for smartphone manufacturers. Even a giant like Apple recently stated during an earnings call that it faces substantial pressure regarding memory supply. Reports suggest it has only secured NAND Flash supply for Q1 and DRAM supply for the first half of the year, with negotiations for the remaining supply volume for the year pending further discussion. Within Samsung, there's even internal conflict over memory. Due to the price of LPDDR5X memory chips for the new Galaxy models increasing over 100% within the year, the mobile division had to request its sibling semiconductor division for a long-term supply agreement. Reportedly, the request was refused by the semiconductor division, highlighting that any camaraderie takes a backseat to KPIs. Last month, Samsung and SK Hynix also warned their smartphone and PC clients to prepare for difficulties in procuring memory, stating that they are "being directly or indirectly impacted by the strong demand for server-related products." This implies that the timeline for smartphone memory to escape supply constraints and see prices normalize depends on when the AI demand is first satisfied. Judging from the recent capital expenditure guidance from tech companies like Google and Meta, which significantly exceeded analyst expectations, that point seems distant. Market research firm TrendForce has publicly revised its Q1 2026 DRAM price quarter-on-quarter increase forecast upwards at least three times since October last year. The forecast rose from an initial 8%-13% to 18%-23%, then to 55%-60%, with the latest updated prediction reaching a staggering 90%-95%. With the memory market effectively becoming a seller's market, cost projections for smartphone manufacturers have become highly unpredictable. For mid-to-low-end phones with already thin profits, "selling at a loss" is becoming a reality. According to a Counterpoint Research report, smartphones are gradually shifting towards higher price segments. The global Average Selling Price surpassed the $400 mark for the first time in Q4 2025, while the mid-to-low-end market continues to shrink. In the US, sales of models below $300 declined by 7% year-over-year in the same period.
As long as the AI sector's suction effect persists, the chill from the supply chain will continue to be transmitted fairly to every terminal manufacturer. It is foreseeable that smartphone brands that have advanced further in their premiumization strategies will hold the initiative due to their more flexible pricing power. They can either use this opportunity to raise prices and further increase ASP, or conversely, lower prices to expand market share, giving them offensive and defensive options. Considering the stable structure of the smartphone market, moving upmarket and raising average selling prices is a top priority for every brand. With memory chip prices soaring, the notion of the "era of the thousand-yuan phone" coming to an end does not seem far-fetched.
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