Nothing must increase smartphone prices due to memory crisis

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Nothing CEO and co-founder Carl Pei has announced that continued rising memory prices will inevitably lead to a price increase for the company's entire smartphone portfolio. “2026 will be an unprecedented year for consumer electronics and especially for the smartphone industry,” said Pei.

The AI boom has fundamentally changed demand

In a long post on X, Pei explains that the smartphone industry has relied for fifteen years on the reliable assumption that components “will inevitably become cheaper.” “While there have been short-term fluctuations, the long-term downward trend in the cost of memory and displays has enabled annual specification improvements without price increases.” This model has “finally collapsed this year due to a strong and unprecedented increase in memory costs.”

This is because the AI boom has fundamentally changed demand: the same memory used in smartphones is now also used in AI data centers. This means that for the first time, “smartphones are in direct competition with AI infrastructure, leading to a sharp increase in memory prices,” Pei further explains.

Exploding memory costs

He calculates that memory costs have already increased by up to 300 percent in some cases, and further increases are expected “as unprecedented demand continues to outstrip available supply.” Memory is thus “rapidly becoming one of the most expensive components of smartphones and could become the largest single item in the bill of materials by the end of the year.” According to estimates, memory modules that cost less than $20 a year ago could cost over $100 for flagship models by the end of the year.

According to Pei, manufacturers now face a “simple choice”: either they increase device prices by 30 percent or more – or they cut back on technical specifications. The “more performance for less money” model, on which many low-cost brands were built, is no longer sustainable in 2026, Pei believes. Furthermore, some markets – especially the entry-level and mid-range segments – could shrink by 20 percent or more. Moreover, manufacturers who have dominated these segments so far could struggle.

“Industry Restart”

Pei sees his company well-positioned for the new challenge, as Nothing has never had the cost advantages of industry giants that they can negotiate through large order volumes. According to Pei, Nothing recognized early on that it couldn't compete solely on spec sheets. “Instead, we focused on perfecting the user experience, proving that the look and feel of a phone are far more important than its raw performance data,” said Pei. This is why the manufacturer also opted for the transparent design of the back and the integrated LED lights “Glyph Interface,” which were replaced by a round dot-matrix display on the Phone (3).

Pei predicts that 2026 will be the year “when the race for the best specifications ('Specrace') ends.” He views the memory crisis as an “industry restart,” where “the experience will become the only real differentiator.”

Not only Nothing is preparing users for a difficult 2026: Even Xiaomi, one of the world's largest smartphone manufacturers, predicted higher smartphone prices back in October. Similarly, analysis firm TrendForce is convinced that 2026 will not be a good year for smartphones and notebooks, mainly due to the memory crisis. Among other things, manufacturers might only equip their entry-level smartphones for 2026 with four GByte RAM, whereas the previous standard provided up to eight GByte.

The market researchers at Counterpoint also predict in an analysis for 2026 that the smartphone market could fall by up to 2.1 percent due to the memory situation. The lower market segment (under $200) is particularly affected, as material costs have risen by 20 to 30 percent since the beginning of the year (2025). Counterpoint predicts that RAM prices could rise by another 40 percent by the second quarter of 2026. According to the analysts, Apple and Samsung are best positioned to weather the coming quarters, while smaller manufacturers without similar negotiating power are likely to face difficulties.

(afl)