The Era of Cheap Chinese Smartphones is Coming to an End

The era of cheap smartphones made in China, which has dominated the global market for over a decade, is now facing significant pressure.

The surge in memory chip prices due to the artificial intelligence (AI) boom, combined with geopolitical tensions fracturing the semiconductor supply chain, is making the low-cost mobile phone business model increasingly difficult to sustain.

If this trend continues, the global smartphone industry could enter a new phase where cheap phones are no longer as affordable as before, and may even become increasingly rare.

Signs of this change were evident at the Mobile World Congress (MWC) in Barcelona earlier in March.

One example is Xiaomi, which announced its latest series of phones at a price of 999 euros on the event stage. However, industry analysts estimate that the actual retail price could change when the phone is truly sold in the market.

This situation is occurring because the costs of key mobile phone components, especially memory chips, are changing very rapidly.

One of the main causes of this change is the increasing demand for memory chips for AI data centres.

AI servers require a type of high-speed memory called high-bandwidth memory (HBM). This memory is typically used alongside AI GPUs such as those produced by Nvidia.

Due to the sharp surge in AI demand, global memory producers like Samsung Electronics, SK Hynix, and Micron Technology are beginning to shift much of their production capacity from conventional memory to memory for AI servers.

Research firm TrendForce estimates that DRAM prices (the main memory in phones and computers) will rise by around 90-95% in one quarter. Meanwhile, NAND flash prices (internal storage memory) are increasing by about 55-60% over the same period.

Some industry reports even state that DRAM prices can change within hours, especially for small buyers who do not have long-term supply contracts.

The surge in AI demand has divided the global memory market into two groups as if it were.

The first group consists of large companies with high purchasing power, such as cloud service providers and premium device manufacturers. Companies like Apple or Samsung have long-term supply contracts, so they can still get priority distribution of memory.