Summary of Key Points
Recently, the smartphone industry has witnessed a completely counterintuitive scenario: despite consumers' low willingness to upgrade their phones, global smartphone shipments are expected to decline by 16.7%, the largest drop in nearly a decade. However, all major smartphone manufacturers have collectively raised their prices, with increases ranging from 200 to 1000 yuan. The root cause of this abnormal behavior is the surge in demand for AI servers, which has exhausted the production capacity of memory chips. The price of memory chips has risen by 80% in just half a year, doubling the material costs for smartphones. Huawei has already secured long-term agreements to lock in chip prices and quantities, ensuring a supply for the next few years. Other smaller manufacturers are still struggling to obtain chips, and low-cost smartphones priced around 1000 yuan in China are likely to exit the domestic market and target Southeast Asia for sales. The entire industry is trying to encourage consumers, who are holding back on upgrades, to make the switch by featuring AI-powered smartphones and Huawei's self-developed "Taochip." This shortage and price increase are expected to continue until at least 2027, making it difficult for ordinary consumers to take advantage of previous price drops to buy new phones in the next two to three years.
Detailed Explanation
1. Why are smartphones, which are hard to sell, becoming more expensive?
In the past, when smartphones were not selling well, manufacturers would reduce prices to clear inventory. Now, prices are rising because the cost of raw materials has risen so much that it's unprofitable to sell even one phone. Memory chips, which used to account for only 10%-15% of the total cost of a smartphone, now account for 30%-40% due to the high demand from AI server manufacturers. Additionally, Qualcomm has also announced price increases for its entire range of smartphone chips, further squeezing manufacturers' margins. The global average smartphone price has risen from 3300 yuan in 2025 to 4000 yuan in 2026, a 21% increase, the highest in history. The claims of "lowest prices during 618 sales" and "school season discounts" are just marketing tactics.
2. Divergent survival situations for manufacturers:
Huawei has anticipated the chip shortage and secured long-term agreements, increasing its inventory by 82.4 billion yuan and spending an additional 110 billion yuan on raw materials, ensuring a supply for the next few years. This allows Huawei to avoid the pressure of competing with rising prices. In contrast, manufacturers like Xiaomi, OPPO, and vivo, which did not secure such agreements, are struggling with dwindling chip supplies and are forced to cut production by 30%-50% for their flagship models, resulting in significant losses.
3. Low-cost smartphones in China are disappearing, with a shift to Southeast Asia:
Many new phones priced around 1000 yuan are becoming rare, and even dealers are reluctant to sell them. The reason is simple: costs have risen so much that selling them results in losses. Brands like Realme have already decided to focus on markets in Southeast Asia and Africa, where labor costs are lower and Chinese smartphones have not yet seen price increases. They aim to maintain a foothold in these markets with lower prices. It is expected that price increases will eventually spread to Southeast Asia, as chip costs are rising globally.
4. Manufacturers creating new selling points:
To encourage consumers to upgrade, manufacturers are focusing on two main features: AI-powered smartphones and Huawei's "Taochip." While traditional smartphones can still last for three to four years without issues, manufacturers are creating new demand. Huawei's "Taochip" uses 3D stacking technology to enhance performance without relying on individual chip precision. However, whether consumers are willing to pay more for these advanced features remains to be seen.
5. Practical advice for consumers:
There's no need to rush into upgrading your phone just yet. The chip shortage and price increases are expected to last until at least the end of 2027, with prices unlikely to drop significantly in the next two years. If your current phone is still functioning well, there's no need to follow the trend and believe sales claims of impending price hikes. If you really need to upgrade, consider brands like Huawei, which have secured chip supplies and are less likely to face supply issues or price increases. Smaller brands may face production disruptions and difficulties with after-sales service if they can't secure enough chips.
In summary, the current shortage and price increase in the smartphone industry are due to the high demand for AI servers and memory chips. Manufacturers are creating new selling points, but whether consumers will be willing to pay more for these advanced features remains uncertain. It's best to wait until 2027 to see if prices stabilize before making a decision to upgrade.