Rising Memory Costs Drive Up Prices of Consumer Electronics

The increasing demand for artificial intelligence (AI) is significantly impacting the prices of consumer electronics, particularly smartphones, tablets, and smartwatches. Major tech companies, including Meta, Microsoft, and Google, are expanding their data centers to accommodate the growing AI market. This shift has led memory manufacturers like Micron and Samsung to prioritize production for data centers over consumer products, resulting in a shortage of memory resources for devices used by everyday consumers.

CNNAI boom expected to raise prices on smartphones, smartwatches and tablets

According to Counterpoint Research, memory prices are expected to surge by 30% in the fourth quarter of 2025, with an additional increase of 20% anticipated early in 2026. This escalation in memory costs is projected to make smartphones 8% to 10% more expensive to produce in 2025, which could translate to higher retail prices for consumers.

CNN

The ramifications of rising memory costs are particularly pronounced for cheaper Android phones, which typically have thinner profit margins. Nabila Popal, a senior research director at the International Data Corporation, indicated that it may be "almost impossible" for manufacturers not to raise prices on these lower-cost devices. The average selling price for smartphones is projected to rise to $465 in 2026, up from $457 in 2025, contributing to a record market value of $578.9 billion.

CNN

Manufacturers may also consider postponing the launch of new models, focusing instead on more expensive devices that promise higher profitability. This strategic shift reflects the industry's adaptation to the current economic pressures stemming from the AI boom.

CNN

Yang Wang, a senior analyst at Counterpoint Research, described the current situation as "brutal and crunched across the board," emphasizing the unexpected speed at which AI demand has surged. He noted that the semiconductor industry is accustomed to fluctuations in supply and demand but was not prepared for the rapid changes driven by AI growth.

AI boom expected to raise prices on smartphones, smartwatches and tablets

Jaejune Kim, executive vice president for memory at Samsung, acknowledged strong demand for memory related to AI and data centers, predicting that the supply shortage for mobile and PC memory will "intensify further."

CNN

While the tech industry adapts to these changes, some critics argue that the focus on AI-driven growth may neglect the needs of everyday consumers. The potential for increased prices on essential devices could disproportionately affect lower-income individuals who rely on affordable technology.

AI boom expected to raise prices on smartphones, smartwatches and tablets

Looking ahead, analysts suggest that the supply chain may eventually adjust to the heightened demand for memory, potentially stabilizing prices later in 2026. However, for the immediate future, consumers should prepare for rising costs in consumer electronics as manufacturers navigate the challenges posed by the booming AI sector.

CNN