Sharp surge in memory chip prices triggers 'shrinkflation' in consumer electronics

A sharp surge in memory chip prices, driven by rising demand from the global build-out of AI infrastructure, is forcing consumer electronics manufacturers to borrow a leaf from the FMCG playbook — strip down product specifications and features to avoid frequent price hikes. It’s called ‘shrinkflation’.

Memory prices have seen an “unprecedented and record-breaking” 80-90% quarter-on-quarter surge, with the upcycle beginning in November 2025, according to market tracker Counterpoint Research.

Rather than passing on successive cost increases to consumers, brands — particularly those in the mass market segment — are opting for lower memory configurations and scaled-down hardware specifications, just like FMCG firms reduce pack weights or sizes while keeping prices unchanged when input cost inflation is high.

“There have already been a few rounds of price hike for smartphones in the last three months with prices going up anywhere from 5% to 20%. Now companies are trying to offset the continuous rise in memory chip prices by using shrinkflation with trade-off on different components and reducing trade margins,” said Tarun Pathak, research director at Counterpoint Research.

Demand Pangs

It's not just smartphones. Memory chips are integral to a wide range of consumer electronics, including laptops, tablets and smart televisions, as well as smart and AI-enabled appliances such as mid- to premium-segment refrigerators, air conditioners and washing machines.

A leading South Korean electronics major has introduced a 0.9-tonne air conditioner in India, deviating from the conventional 1-tonne industry benchmark. Similar specification adjustments are being observed in newer laptop and smart television models, signalling a broader recalibration across product categories.

Industry executives indicate that entry- and mid-segment products are bearing the brunt the most as they face higher risk of jeopardising demand amid sustained spike in input costs.

“So, stripping down on some hardware spec, features and warranty period will be the way to go forward as chip prices are expected to go up in the next two quarters too,” a senior executive at a leading electronics company said, requesting anonymity.

Avneet Singh Marwah, chief executive officer of Super Plastronics, which manufactures Kodak, Thomson and Blaupunkt TVs, said the company is rolling out three new models in the entry segment with lower memory configurations. It is also introducing select models in the premium segment with calibrated specifications.

“These models will not see any further price hike, while we are going to soon increase the price of other models by more than 10%,” Marwah said. “In the last 3-4 months, prices have already been hiked by 13-14% across the portfolio,” he said.

The rise in memory prices is mainly driven by a surging general-purpose server DRAM (dynamic random-access memory) prices. NAND flash, which was relatively subdued last quarter, has jumped 80-90% this quarter. Select HBM3e high-speed DRAM products are also seeing higher prices.

This comes at a time when other key input costs for appliances are also under pressure. Copper prices have risen by 30-35% since mid-2025, aluminium continues to trade at elevated levels, and the rupee has depreciated by about 2.5% over the past three months, pushing prices of all imported components.

“Unprecedented price spike of components has made electronics uncomfortably priced,” said Pulkit Baid, director at Great Eastern Retail, which runs over 100 electronic stores in East and North India.

“Brands will launch stripped versions to stick to a sweet price point and hold on consumer interest in several categories. The whole wave of premiumisation may come to a pause,” he added.