Summary of the News
Recently, three leading domestic smartphone brands—Huawei, Xiaomi, and Honor—have collectively raised the prices of multiple models they offer for sale. Some older models have seen price increases of up to 1,000 yuan per unit, with two price adjustments within a single month. This topic has quickly topped the search rankings, but there hasn't been the expected rush to buy products at physical stores; most consumers who are not in a dire need have chosen to wait and see. The main driving force behind these price increases is the soaring costs of components such as storage chips, which has even led to a speculative business in Huaqiangbei (a popular electronics market in Beijing) where people buy scrapped phones to extract chips for resale. Many who tried to profit from this have found themselves stuck with their investments at high prices. Due to these increased costs, phones priced under 1,000 yuan, which were once common, have almost completely disappeared from the market. The entire smartphone industry has entered a new phase where total shipments are declining while the average price per unit is rising.
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Detailed and Easy-to-Understand Explanation
1. These Price Increases Go Against Common Sense: Older Models Are Getting More Expensive, Not Less
The traditional perception of buying phones is that the older they get, the cheaper they become, especially during sales events. However, this round of price increases has completely overturned this trend. Many models released last year have seen price hikes before their inventory could be cleared. For example, the Huawei Mate80, which was released nearly two years ago, now has its top-of-the-line version priced at over 10,000 yuan. Xiaomi has even raised the prices of its main models twice in one month. Interestingly, while online discussions are heated, physical stores are quiet, with no queues of customers eager to buy. This is because smartphone performance is now so high that most people can use a phone for 3-4 years without any issues, and there's no need to replace it unless it breaks. Additionally, consumers are more savvy and realize that price increases are due to rising costs, not a sudden increase in the value of the products. Those who are not in a hurry to buy new phones plan to wait for the annual Double 11 sales to take advantage of discounts. Even with local subsidies in Shanghai of up to 15% or 500 yuan on digital products, these cannot make up for the increased prices.
2. Price Increases Are Not Due to Manufacturers Working Together to Overcharge Consumers: It's AI That's Taking Up Chip Production Capacity
Many people assume the brands are colluding to raise prices, but the real reason is the booming AI industry. Global production capacity for storage chips is being shifted towards AI servers and large AI models, which require much more storage space than regular phones. As a result, the supply of chips for smartphones has decreased significantly, leading to a 80% increase in prices in just half a year. The cost of storage chips now accounts for more than 20% of the total hardware cost of a phone, with some models costing up to 30% of the price for just the memory and storage. Selling a 1,000 yuan phone means spending nearly 300 yuan just on memory and storage. With other costs like processors, screens, and distribution, manufacturers are losing money and have no choice but to raise prices.
3. Chip Price Increases Have Spurred a New Speculative Business: Scrap Phone Recycling for Chips
The rise in chip prices has also affected the secondary market in Huaqiangbei, where people buy scrapped phones to extract chips for resale. What used to be worthless phones are now worth over 200 yuan after having their components removed and repurposed in automotive devices, IoT hardware, or as spare parts for refurbished phones. However, this is not a stable business. In March, storage chip prices plummeted by 40%, and many who had stockpiled scrapped phones before the price increase were left with a huge loss, as the demand from downstream buyers is limited. Any increase in chip prices could quickly reverse if chip manufacturers increase production.
4. The Era of 1,000 Yuan Phones Is Over: Future New Phones Will Be More Expensive
The most significant impact of these price increases is that the path for consumers to buy affordable new phones has become much harder. In 2023, 22% of smartphones in the domestic market were priced under 1,000 yuan, but by the first quarter of 2026, this proportion is expected to drop to 2.7%. All major brands, including Huawei, Xiaomi, OPPO, vivo, and Honor, have stopped selling models priced below 1,000 yuan. In the future, you'll likely have to pay over 2,000 yuan for a new phone with decent specifications and good performance. The industry is entering a new cycle where phone replacements are less frequent, with global shipments expected to decline by 16.7% this year, yet average prices are expected to rise by 27.6%. Manufacturers are no longer relying on low profits to sell large volumes; instead, they are focusing on more expensive mid-to-high-end models to maintain profits.
5. Practical Advice for Consumers
There's no need to panic and stockpile phones. Waiting for your needs to arise and making purchases will be more cost-effective. Experts predict that the rate of storage chip price increases will slow down, but they won't decrease significantly in the short term. New phones will likely continue to be more expensive. It's unnecessary to rush to buy new phones now. First, smartphone performance is already high enough, and your old phone can still be used for another two years if it's not problematic. Second, manufacturers still have inventory of older models, so they won't keep raising prices indefinitely. Double 11 sales will likely offer discounts to boost sales, so consumers should wait for those opportunities. Whether these price increases will push domestic brands to develop more advanced technologies or simply rely on higher prices to make profits remains to be seen, depending on their product offerings.