According to Counterpoint Research, the rapid expansion of artificial intelligence data centers is creating a global shortage of memory chips, particularly DRAM, which is expected to push average smartphone prices up by 6.9% in 2026 while reducing overall shipment volumes.

How artificial intelligence is reshaping the smartphone market

The global smartphone market is entering a new phase where pricing pressure no longer comes from consumer demand or innovation cycles, but from competition with artificial intelligence infrastructure.

As AI data centers expand worldwide, they are absorbing an increasing share of critical semiconductor components. Memory chips, especially DRAM, sit at the center of this shift. These components are essential not only for AI systems but also for smartphones across all price segments.

Counterpoint Research estimates that this competition for memory capacity could significantly alter smartphone economics as early as 2026.

What the data says about prices and volumes

Counterpoint projects that the average selling price of smartphones in 2026 will rise by 6.9%, nearly double the previously expected increase of 3.6%. This change is directly linked to higher component costs rather than premium feature upgrades.

At the same time, global smartphone shipments are expected to decline by 2.1% compared with earlier forecasts that assumed flat or slightly positive growth. While shipments are not the same as sales, they reflect demand expectations within distribution channels and signal growing price sensitivity.

In other words, smartphones are becoming more expensive at a time when demand is becoming more fragile.

Why memory chips are the bottleneck

The core issue lies in DRAM, a type of memory used extensively in AI data centers and also fundamental to smartphone performance. Demand for AI-focused systems—particularly those built around Nvidia architectures—has surged, increasing reliance on memory components supplied primarily by SK Hynix and Samsung.

This demand shock has pushed DRAM prices sharply higher throughout the year, with supply unable to keep pace. According to Counterpoint, memory prices could rise by up to 40% by the second quarter of 2026, increasing memory-related costs by more than 15% from already elevated levels.

Smartphone manufacturers are effectively competing with AI infrastructure for the same components—and losing pricing power in the process.

The uneven impact across smartphone segments

The cost pressure is not evenly distributed.

Counterpoint estimates that the bill of materials for smartphones priced under $200 has already risen by 20–30% since the beginning of the year. In the mid-range and premium segments, material costs have increased by 10–15%.

Low-end manufacturers operate with thin margins and limited flexibility. Even small increases in component prices force difficult trade-offs between profitability and market share.

Who is best positioned to absorb the shock

According to Counterpoint’s research director M.S. Hwang, Apple and Samsung are the most resilient players in the current environment. Their scale, pricing power, and diversified supply chains give them room to absorb higher costs or pass them on gradually to consumers.

By contrast, Chinese manufacturers operating in the mid and low tiers face a much harsher reality. With limited margin buffers, they may be forced to reduce component quality, reuse older parts, or aggressively steer consumers toward higher-priced models.

These adjustments may preserve margins—but they also risk eroding brand trust.

What this means for consumers

For consumers, higher prices may not always come with visibly better hardware. Manufacturers under pressure may quietly downgrade components such as camera modules, displays, or audio systems while maintaining headline specifications.

At the same time, marketing efforts are likely to push buyers toward more expensive models, where margins can better absorb rising memory costs.

The result is a market where affordability declines faster than perceived innovation.

Outlook: 2026 and beyond (analytical)

Assumption-based analysis:
If AI-driven demand for memory continues to outpace supply, smartphones will increasingly be priced according to semiconductor economics rather than consumer upgrade cycles. Until memory capacity expands meaningfully, pricing pressure is likely to persist beyond 2026.

The rise of artificial intelligence is no longer just a technology story—it is a supply chain story with direct consequences for consumer electronics. As AI data centers compete for the same memory chips that power smartphones, higher prices and lower shipment volumes appear increasingly unavoidable. The smartphone market is being reshaped not by what consumers want, but by where chips are needed most.

By Jake Sullivan 
December 25, 2025

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