Rising Memory Chip Costs Threaten Domestic Smartphone Prices Mid-Year, Says Report

Increased memory chip costs and an improved Chinese yuan may cause a rise in the costs for smartphones in mid-year, but industry experts believe that the spike may be countered by recent reductions in import duties on mobile phone parts.

According to Trendforce, key suppliers such as Samsung and Micron are predicting a 15-20 per cent increase in DRAM costs in the March quarter. The surge is fueled by rising demand for high-performance computing and AI, which will result in a shortage of DRAM (Dynamic Random Access Memory) by 2024, as per a report by the Economic Times. The recovery in the PC and smartphone market space will also contribute to the rising prices.

Sources cited in the report told ET that the price hike's impact will emerge from the next quarter since vendors have ample component inventory for March.

Moreover, the yuan appreciated by 6.7 per cent, climbing from Rs 11.32 in June 2023 to Rs 12.08 in December, adversely impacting brands reliant on imported Chinese components.

Meanwhile, market analysts have warned that a rise in final prices could dampen the recent recovery witnessed in domestic demand. Brands may consider offering budget smartphones with reduced memory and storage capacities instead of increasing handset prices as a potential solution.

Higher memory prices may hinder the expected rise in 5G smartphones that cost less than Rs 10,000. Counterpoint's current estimate suggests that 1-2 per cent of shipments under Rs 10,000 will feature 5G support, a reduction from its 4 per cent projection in November 2023.