Phones might get pricier next year. Thank the AI boom
By Lisa Eadicicco, CNN
(CNN) — Fancy cameras, giant screens and massive storage usually make smartphones more expensive. But next year, it’s a routine component that might be boosting prices: memory.
And it’s not just phones. Any device that uses memory, from phones to tablets and smartwatches, could get pricier.
Memory prices are rising for consumer products because major manufacturers are instead ramping up production for AI data centers as artificial intelligence companies boom.
“It’s pretty much brutal and crunched across the board,” said Yang Wang, a senior analyst at Counterpoint Research.
The International Data Corporation, a global market research firm, reported earlier this week that the smartphone market is expected to decline by 0.9% in 2026 in part because of memory shortages. Memory prices are expected to surge by 30% in the fourth quarter of 2025 and may climb an additional 20% early next year, Counterpoint Research said last month.
A boom in data center demand
Tech companies like Meta, Microsoft and Google have aggressively expanded their data centers and infrastructure this year to keep up with AI demand. And that growth is expected to continue: A report from McKinsey & Company indicates companies will invest nearly $7 trillion in data center infrastructure-related costs globally by 2030.
That’s prompted memory manufacturers like Micron and Samsung to shift their focus to data centers, which use a different type of memory than computers and smartphones. As a result, there are fewer resources for consumer products, said Wang.
Memory and storage company Micron announced on Wednesday that it’s exiting the consumer memory business, citing a “surge in demand” coming from “AI-driven growth” in data centers.
Jaejune Kim, executive vice president for memory at Samsung, said in October that the company saw strong demand for memory for AI and data centers in the third quarter. He also said the supply shortage for mobile and PC memory is expected to “intensify further.”
Higher phone prices
Gadget makers may have to face tough decisions about when to launch and how to price their products, analysts say. TrendForce, a research firm that follows the semiconductor industry, estimates memory price hikes have made smartphones 8% to 10% more expensive to produce in 2025 (higher production costs don’t always translate into higher consumer prices for a variety of reasons).
Some smartphones could cost more as soon as early next year, said Nabila Popal, a senior research director for the International Data Corporation. Cheap Android phones may see the biggest impact, since less expensive products usually have thinner margins.
“It’s going to be almost impossible for them to not raise prices” of cheaper Android phones, said Popal.
Companies may also postpone phone launches to focus on expensive models that may be more profitable. The average selling price for smartphones is expected to climb to $465 in 2026, compared to $457 in 2025, according to Popal, putting the smartphone market at a record high value of $578.9 billion.
But the pendulum is expected to swing back in the other direction late next year as the supply chain adjusts, according to Popal and Wang, potentially bringing prices back down or at least capping increases.
The semiconductor industry is used to grappling with change as new technologies emerge, says Wang. But it may have not been prepared for how quickly AI demand would grow.
“In the semiconductor space, there’s always going to be a mismatch (in supply and demand),” he said. “This was kind of unexpected.”
The-CNN-Wire
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