Planning to buy smartphone? Prices to rise 30% soon, says Jefferies report

Buying a new smartphone could become significantly more expensive in the coming months, particularly for people looking at budget Android devices. A sharp increase in memory component costs, fuelled by the artificial intelligence (AI) boom, could push prices of low-end smartphones up by nearly 30%, according to a report by global brokerage firm Jefferies. The rising cost of components is creating fresh challenges for smartphone manufacturers. With AI companies consuming an increasingly large share of global memory supplies, manufacturers are facing higher input costs. These expenses could eventually be passed on to buyers, making affordable smartphones less accessible. For consumers, this could mean paying considerably more for a phone with similar specifications or postponing an upgrade altogether.

Why could smartphone prices increase by 30%?

The growing demand for memory chips from AI companies is emerging as a major reason behind the expected price increase. Data centres and AI infrastructure require large quantities of memory, putting pressure on supplies available to other industries, including smartphone manufacturing.

According to Jefferies, memory demand from the AI industry could account for around 60% of total demand in calendar year 2027 (CY27). The report also highlighted the massive investments planned by AI companies. Their targeted capital expenditure could reach around $1.5 trillion in CY27. This spending is expected to keep memory prices elevated for several more quarters.


The impact on smartphone manufacturers is already becoming visible. Jefferies estimates that the memory cost per smartphone has increased nearly threefold, from approximately $20 in CY25 to $60-$65 currently. Memory is particularly important for affordable smartphones, where manufacturers have limited room to absorb additional expenses without affecting their margins or retail prices.

Budget Android phones could face the biggest price shock

The affordable smartphone segment is likely to bear the maximum impact of rising memory costs. Jefferies pointed out that memory accounts for approximately 60% of the total bill of materials (BOM) for Android smartphones priced below $200. BOM refers to the combined cost of the components required to manufacture a device. When a major component becomes significantly more expensive, manufacturers have limited options to protect their margins.

The brokerage warned that a price increase of around 30% in low-end smartphones could change consumer behaviour.Some buyers may delay their purchases rather than spend more on a budget device. Others could turn to refurbished or second-hand smartphones as a cheaper alternative. Manufacturers may also reduce the number of affordable models available in the market and cut down their distribution networks to control expenses.

Smartphone shipments could decline in 2026 and 2027

Higher component costs and weaker consumer demand could affect the global smartphone market over the next two years. Jefferies expects global smartphone shipments to fall 15% year-on-year to 1,067 million units in CY26. The decline could continue in CY27, with shipments projected to drop further to 911 million units.

Although the brokerage has marginally raised its earlier shipment estimates for both years, the overall outlook remains challenging. The pressure is expected to be particularly visible in the lower-priced category.

According to the report, smartphones priced below $200 could see their share of the global market fall from 42% in CY25 to 24% in CY26. In comparison, the market share of smartphones costing more than $600 could increase from 29% to 38% during the same period. This suggests that the smartphone market could gradually shift towards more expensive devices as budget models become harder to manufacture profitably.

Chip shortages could make smartphones even more expensive

Memory is not the only component creating difficulties for smartphone companies. The report also highlighted semiconductor shortages as a major supply-chain concern. To manage manufacturing expenses, some companies may consider using processors that are one or two generations older instead of the latest flagship chips.

This could help manufacturers control costs, although consumers may have to compromise on the latest hardware and performance features. The situation could also create longer-term challenges for the industry. Jefferies cautioned that even if smartphone demand recovers quickly from CY28, manufacturers may struggle to restore shipment levels if they reduce production capacity during the current slowdown.

For consumers planning an upgrade, the coming quarters could therefore bring a difficult choice: pay more for a new device, settle for older specifications or continue using an existing smartphone for longer.

(Inputs from ANI)