The AI race hits the smartphone market: Price hikes expected

The sharp rise in demand for AI technologies in the global tech market is causing unexpected consequences. Specifically, the need for memory chips required for AI data centers has created a shortage of components for smartphones, leading to rising device prices. This is according to Techcrunch.com reports.

According to data from the analytical center Counterpoint Research, smartphone shipments in India, the world's second-largest smartphone market, fell by 10 percent in the second quarter of this year compared to last year. This is the sharpest decline in the last six years, and experts directly attribute it to the rising costs of RAM and storage chips.

Memory chip shortages and manufacturer strategies

Chip giants like Samsung, SK Hynix, and Micron are currently shifting their production capacity toward High Bandwidth Memory (HBM) chips. These chips are critical for AI accelerators, and producing them is significantly more profitable than standard memory chips for smartphones. As a result, the volume of components for consumer electronics is decreasing, and their production costs are rising.

This situation has hit the budget smartphone segment particularly hard. Phones priced under $210 account for nearly 60 percent of the Indian market. As memory chip prices rise, manufacturers are struggling to stay within this price range, leading to a decline in shipments of up to 45 percent.

Market changes and consumer response

According to TechCrunch, price hikes are also affecting consumer behavior. Users are now extending their device upgrade cycles from an average of 3.5 years to 4 years. However, premium brands like Apple and Samsung are suffering relatively less from this crisis, as the demographic purchasing high-end devices is less sensitive to price changes.

Chinese brands, including OnePlus, are rethinking their strategies due to the emerging economic challenges. The company announced it would stop launching new products in European and North American markets, focusing instead on the Indian and Chinese markets. Such changes are expected to fundamentally alter the competitive environment in the global market.

This trend is also relevant for the Uzbekistan market. Given that the budget smartphone segment is popular in our country, it is highly likely that the global shortage of components will be reflected in local retail prices in the coming months.