Smartphone, PC sales expected to drop on higher prices due to surging memory chip costs

Bengaluru - Global demand for smartphones, personal computers and gaming consoles is expected to shrink in 2026 as companies from Britain’s Raspberry Pi to HP raise sticker prices to offset surging memory chip costs.

The rapid build-out of artificial intelligence infrastructure by US tech firms such as OpenAI, Alphabet-owned Google and Microsoft has absorbed much of the world’s memory chip supply, pushing up prices as manufacturers prioritise components for higher-margin data centers over consumer devices.

Samsung, SK Hynix and Micron, the world’s three largest producers of memory chips, have said in recent months that they were struggling to keep up with demand as they reported rosy quarterly earnings on the back of surging prices for their semiconductors.

But the price surge is rippling through consumer markets.

Research firms IDC and Counterpoint both now expect global smartphone sales to shrink at least 2 per cent in 2026, in a sharp reversal from their growth outlook a few months ago. That would mark the first annual decline in shipments since 2023.

The PC market is expected to shrink at least 4.9 per cent in 2026, IDC estimated, after an 8.1 per cent growth in 2025. Meanwhile, console sales are expected to fall 4.4 per cent in the current year after an estimated growth of 5.8 per cent in 2025, according to TrendForce.

Tough choices for manufacturers

While several firms have already raised prices, industry heavyweights Apple and Dell face a tough choice: take on the costs and sacrifice margins or pass them onto consumers at the risk of stifling demand.

“Manufacturers might absorb some costs but given the scale of the shortage, it is certainly going to show up as higher prices for consumers,” Emarketer analyst Jacob Bourne said.

“It is going to result in more tepid consumer device sales in 2026. It will be a challenge for these companies that are trying to sell products during a time of broader inflation.”

Pressure is being compounded by expectations that the price increases will persist, possibly into 2027. Counterpoint estimates that memory prices will jump 40 per cent to 50 per cent in the first quarter of 2026, after 2025’s 50 per cent surge.

“Over the last two quarters, we’ve seen 1,000 per cent price inflation in some products and pricing is continuing to rise,” said Mr Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide.

“Consumers can expect to pay significantly higher prices for laptops, mobile phones, wearables and gaming devices very soon.”

Analysts believe the impact is likely to be most pronounced for manufacturers of low- and mid-range devices, such as Chinese smartphone makers Xiaomi and TCL Technology and PC firm Lenovo.

TrendForce said in 2025 that Dell and Lenovo were planning price hikes of as much as 20 per cent early in 2026.

Shares of all Raspberry Pi, Xiaomi, Dell, HP and Lenovo fell in the last three months of 2025, with Xiaomi posting the biggest drop with a 27.2 per cent decline.

HP chief executive Enrique Lores said in November the company would raise PC prices due to “significant” memory chip costs, while Raspberry Pi CEO called the cost surge “painful” in a December blog post announcing price increases for its devices.

The weaker demand outlook could also hamper sales at electronics-focused retailers such as Best Buy, which had already warned in 2025 that tariff-driven price increases could dissuade potential buyers.

Apple’s market power

Some analysts said Apple, with its scale, pricing power and deep supplier network, is better positioned to weather the memory chip price surge than its smaller rivals.

The company typically holds prices of its flagship iPhone line-up in the United States steady between its September launch events. In 2025, it absorbed the hundreds of millions of dollars in tariff-related costs, instead of passing them on to customers.

“Apple is better-positioned, as it uses contract pricing (rather than more volatile spot pricing) for its purchases, securing better prices,” Morningstar analyst William Kerwin said. “But it isn’t immune, and may need to raise prices to pass on higher input costs.” REUTERS