Summary of Key Points
Recently, there has been a widespread increase in chip prices, leading to two unusual phenomena: first, older phones have become more valuable due to the increased value of their chips; second, new phones are not only more expensive but may also come with reduced specifications (such as using lower-quality chips or cutting out features). This situation, where older phones gain in value while new phones suffer from decreased quality, is unprecedented. The underlying cause is a severe imbalance between chip supply and demand. We need to understand why the prices are rising, when this will stop, and what ordinary people should do in response.
1. Why Have Older Phones Suddenly Become More Valuable?
Chips are the “heart” of a phone, and with the increase in chip prices, the chips in older phones have become a scarce resource. For example, if your old iPhone uses an A15 chip, it would be much more costly for a new phone to use the same chip, which is why the price of older phones with good chips has gone up in the used market. Some people prefer to buy a well-conditioned old phone rather than spend more on a new one with reduced specifications. Additionally, manufacturers are increasingly interested in recycling old phones to extract their chips for reuse, which has also driven up the resale value of these phones. In short, the scarcity of chips has made them more valuable.
2. Why Are New Phones More Expensive and of Lower Quality?
Chips account for a significant portion of the cost of a phone (often 20%-30% for mid-to-high-end models). With rising chip prices, manufacturers have two options: either raise the price directly or cut back on specifications (such as removing wireless charging or high refresh rate features) to reduce costs. For instance, this year’s model of a certain brand is 300 yuan more expensive than last year’s, but its processor has been downgraded from a flagship level to a mid-range one. This is a common strategy to maintain prices despite the increased cost.
3. Why Have Chip Prices Suddenly Skyrocketed?
The main reasons are a surge in demand and a failure to keep up with supply:
- Demand: Not only phones but also cars (which require more chips for electrification and autonomous driving), AI devices (such as those used by ChatGPT), and smart home appliances are all competing for chip resources, leading to a sudden increase in demand.
- Supply: Chip manufacturing plants (known as foundries) cannot be built overnight; it takes billions of dollars and 2-3 years to start production. Moreover, the cost of raw materials (such as silicon wafers and photolithography chemicals) is rising, and U.S. restrictions on Chinese chip exports have further exacerbated the situation. It’s like 100 people competing for 50 loaves of bread—prices are bound to go up.
4. When Will These Price Increases Stop?
It depends on whether supply can catch up with demand:
- Major manufacturers like TSMC and Samsung will not start producing new chip factories until the end of 2024 or 2025, so it will take another 1-2 years for supply to increase significantly.
- If the economy slows down or sales of phones and cars decline, demand may also decrease.
Based on these factors, it is likely that chip prices will stabilize by the end of 2024 to 2025, but it may take even longer for them to return to their previous low levels.
5. What Should Ordinary People Do?
- Don’t rush to replace your old phone: If it’s still functional, keep using it; you can save money and get a good price when you sell it later.
- Compare carefully before buying a new phone: Don’t just focus on the brand; check whether the chip specifications have been reduced and how much the price has increased. Choose a model that offers good value for your money.
- Wait if you don’t need a new phone immediately: If your phone isn’t broken, wait until chip prices stabilize; it might be more cost-effective to buy then.
In summary, this increase in chip prices is temporary. While it may seem like a good time to buy a new phone at a lower price, older phones have become a form of “hard currency” due to their increased value. Take good care of your old phone!