Global smartphone shipments fell 11 percent in the latest quarter, dropping to the weakest second-quarter level since 2013, according to Counterpoint Research. The firm pins the slide on a component problem with a familiar shape: DRAM and NAND flash have become more expensive as memory suppliers chase demand from AI computing.
That hits phone buyers in a boring but expensive place. DRAM is the working memory that lets apps and the operating system run without constant trips to slower storage. NAND is the flash storage that holds the operating system, apps, photos, and everything else people pretend they will back up later. When both get pricier at the same time, the bill of materials for a phone rises fast.
Counterpoint said manufacturers have shifted more of their attention toward the AI computing boom, leaving fewer memory components available for consumer devices such as smartphones and PCs. As those parts cost more, phone makers either absorb the increase, raise prices, cut specifications, or delay models. Consumers then face less attractive upgrades, which helps explain the weaker shipment numbers.
The pressure is not spread evenly. A separate Omdia report said rising memory costs are especially damaging for phones priced at $500 or below. In those devices, memory can now make up as much as half of the manufacturing cost, Omdia said. That leaves little room for vendors that sell on thin margins and compete by shaving dollars from the parts list.
Flagship phones are not immune, but the math is less brutal. Omdia said memory now accounts for more than a quarter of the cost of premium devices, a sharp increase from the prior year. Higher-end phones still give manufacturers more room to preserve profit, because buyers in that tier are already paying more and vendors have more pricing flexibility.
That helps explain why Apple and Samsung are better placed than many smaller or budget-focused brands during the shortage. Both companies sell large numbers of premium phones, where memory inflation is painful but less likely to wipe out the economics of a device. The current squeeze is nastier for companies that depend on cheaper Android models, where a few extra dollars in DRAM or NAND can break the product plan.
The broader smartphone market had already stopped behaving like a guaranteed growth machine. Shipments began flattening years ago, and the number of phone manufacturers has shrunk. The AI hardware cycle has now added another constraint: memory suppliers have more lucrative places to send components, while phone makers and buyers deal with the leftovers.
This story draws on original reporting from Ars Technica.
