"Memory Surge" 100 Days: Low-end Phones Are Forced to Die

Questioning AI · Why Does Memory Surge First Push Low-End Phones Out of the Market?

Text by Su Yang

Edited by Xu Qingyang

Everyone has seen it: Xiaomi said that price hikes are “painful,” while Transsion, Lenovo, OPPO, and vivo have all raised prices one after another.

The entire consumer electronics industry is trying to offset the rising memory costs and their impact on profits through price increases. Soon, the effects of these price hikes have been transmitted to the consumer side.

“I bought a lifetime warranty memory stick that encountered problems, but after nearly a month of customer service, there’s been no substantial progress,” a consumer wrote in an email, but faced the dilemma of being told it cannot be repaired or replaced, only refunded.

Consumers demand lifetime warranties, but platforms are only willing to process refunds. This is a performance breach caused by the surge in memory prices, and the key lies in the word “surge.”

On social media, in the comment sections of major e-commerce platforms, discussions about memory prices doubling are common. Storage has become a “yearly financial product,” jokingly called electronic gold by the industry, while rising product prices simultaneously hurt “cyber players” and consumer electronics manufacturers.

According to Xiaomi President Lu Weibing, in Q1 2026, memory prices increased by approximately 400% year-over-year, soaring from $30 to over $120.

A founder of a Mini PC brand said that costs were already high, and with storage prices rising, prices have skyrocketed. “Before, users thought ‘it’s so expensive,’ now they just don’t look at it at all. They don’t care how big your memory and hard drive are.”

The storage battle between AI giants and the mobile phone camp. Image generated by AI

01. Even Apple Can’t Handle the Memory Surge

Among Chinese mobile phone manufacturers, Transsion, known as the “King of African Phones,” was the first to feel the chill of storage price hikes.

“Everyone is under a lot of pressure—costs, selling prices, budgets—all are directly affected,” said an insider from Transsion when asked about the impact of rising storage costs.

Previously, in Transsion’s 2025 performance report, it stated that due to supply chain costs, the prices of storage and other components had increased significantly, impacting the company’s product costs and gross margins, leading to a decline in overall gross profit margin during the reporting period.

“Last year, its stock price fell so much because the market said Transsion had no stock—not because of price issues, but because of stock shortages,” emphasized a researcher who has been tracking the storage industry. He pointed out that Transsion has no memory inventory, but this news of stockouts has not been further confirmed by Tencent Tech.

Xiaomi’s President Lu Weibing quantified the craziness of memory price hikes at MWC.

Lu Weibing revealed that in the first quarter of this year, memory prices were about four times higher than in the first quarter of last year. “A 12GB+256GB memory combo, at its lowest price, was about $30, and four times that means it’s already around $120–$130.”

The storage dilemma, whether for domestic phones or giants like Apple, is unmanageable.

At the recent Q1 earnings call, Cook mentioned two major uncertainties regarding the supply chain. Well-known analyst Ming-Chi Kuo summarized them as supply restrictions and cost pressures. However, supply restrictions mainly refer to advanced process nodes used in SoCs, while cost pressures are primarily reflected in memory procurement.

“We face limitations from the availability of advanced nodes, which are the foundation of our system-on-chips. From the memory perspective, the impact on Q1 was minimal, but it’s expected to have a greater effect on gross margins in Q2,” Cook said.

What does this mean? Cook indicated that Apple fears that TSMC’s capacity for advanced processes might be insufficient to deliver chips, and that rising memory prices are just eroding margins. In other words, they are not worried about memory supply.

A noteworthy detail about Apple’s storage demand is that, since iPhones use DRAM and NAND that account for 20–25% of the mobile storage market, Apple has not classified storage as a supply restriction. Ming-Chi Kuo believes this is a positive for non-AI storage products—it indicates supply has eased.

However, long-term semiconductor industry investor Chen Qi believes that Apple’s ability to “maintain supply” mainly depends on its strong cash flow. “Apple has a robust cash reserve and high profit margins. Even if Samsung raises prices by 100%, they can still confidently agree because having money means capturing market share.”

But even Apple, as strong as it is, has to make concessions when storage is a seller’s market. The aforementioned storage industry researcher revealed that last year, when it was a buyer’s market, everyone signed long-term supply contracts with memory manufacturers. Now, they are mostly signing quarterly agreements.

Overall, whether supply has eased or not, the surge in memory prices directly impacts the gross margins of mobile phones, PCs, and other consumer electronics manufacturers.

02. Mobile Phones and PCs Follow Suit in Price Hikes

Memory price increases are impacting consumer electronics manufacturers on a quarterly basis.

Ming-Chi Kuo predicted that iPhone storage prices are now negotiated quarterly, so prices are expected to rise again in Q2 2026. “Currently, the quarter-over-quarter increase in Q2 is roughly similar to Q1.”

Similar situations are happening with Lenovo.

In late November 2025, Lenovo announced it had signed long-term supply contracts with key component suppliers to cope with the continuous rise in storage chip prices driven by soaring AI demand.

“We’ve signed optimal contracts with core suppliers to ensure sufficient supply next year,” Yang Yuanqing said during the Q2 earnings presentation.

A quarter later, Blue Whale News reported that, amid the recent memory price surge, Lenovo had issued price adjustment notices to its channel partners, deciding to raise prices on some of its computer products.

“I feel Lenovo can’t escape this big storage cycle. Huawei already raised prices in Q4 last year, and they were a quarter late, probably stockpiling for an extra quarter.” said an investor who recently attended Lenovo’s Tech World in Hong Kong.

As inventory levels decline and memory prices stay high, the most direct response from terminal brands is to raise prices, passing the cost pressure onto consumers. This explains the earlier mention of various phone manufacturers announcing price hikes.

Of course, for certain brands, price increases are also driven by other factors. The aforementioned Transsion insider revealed that price hikes are also influenced by regional and geopolitical factors. “Headquarters set annual base prices, and regions adjust according to local conditions. For example, the Middle East is also facing difficulties—sometimes logistics are a problem. During this MWC event, many Middle Eastern clients couldn’t even fly out.”

For consumer electronics brands, memory is a factor, but not the decisive one—they still need to bring products to market. A storage supply chain insider said, “At this stage, customers are no longer sensitive to prices; they mainly care about supply stability.”

However, following the trend of price hikes can also harm terminal brands passively.

In February’s earnings call, SMIC’s co-CEO Zhao Haijun said that strong AI demand for storage has squeezed supply for mobile phones and other applications, especially in the mid- and low-end markets, causing terminal manufacturers to face shortages and price pressures. “Even if terminal manufacturers try to offset rising costs by adjusting prices, it can lead to decreased demand for their products.”

03. Low-End Phones Are Heading Toward Obsolescence

Price hikes erode margins and threaten the survival of low-end models.

Counterpoint’s recently released “Storage Price Tracking Report” shows that in Q1 2026, DRAM prices increased over 50% quarter-over-quarter, while NAND prices surged over 90%.

For low-end phones priced below $200 wholesale, with unchanged other costs, a configuration of 6GB LPDDR4X + 128GB eMMC will increase material costs by about 25% quarter-over-quarter, with storage accounting for as much as 43% of the total bill of materials.

“Rising storage prices are causing structural impacts on the BOM costs of smartphones,” emphasized Counterpoint senior analyst Shenghao Bai.

This structural change has the most immediate impact on low-end models—selling one unit may mean losing money.

Therefore, without considering market share strategies that involve losses, the most direct response is to cut shipments of low-end models or even eliminate product lines.

The long-term storage industry researcher mentioned earlier revealed that some domestic manufacturers have already stopped producing entry-level lines. “Once inventory is sold out, they won’t produce again in the short term.”

Besides trimming product lines, the aforementioned supply chain insider also suggested adjusting hardware configurations.

“Big manufacturers can push R&D to optimize costs,” he said, emphasizing that adjusting parameters during R&D—without affecting performance—can help balance the increased storage costs. This approach is also mentioned in Counterpoint’s report, summarized as “specification optimization.”

However, Counterpoint pointed out that, given the surge in storage prices, conventional cost-cutting measures are insufficient. They estimate that retail prices for low-end devices will increase by about $30.

“Companies are in a tough spot: if they raise prices, they lose sales; if they don’t, they can’t sell, and if they cut costs, margins shrink,” said the aforementioned Mini PC startup founder.

04. Storage Will Never Return to the Past

According to Lu Weibing’s forecast timeline, storage prices will continue to rise until the end of 2027.

Counterpoint analyst Shenghao Bai also expressed a pessimistic outlook: “Short-term relief is unlikely; 2027 might be the earliest window for stabilization.”

Investor Chen Qi said that to buy at previous prices, it might really have to wait until 2027. He emphasized that short-term storage prices are unlikely to decline rapidly. The external environment remains under pressure, and capital confidence in AI is uncertain. “The key depends on whether Middle Eastern capital continues to invest in data centers and keep funding AI companies.”

This circles back to the background of rising storage prices—AI demand is squeezing normal consumer demand.

Since late 2025, some manufacturers have aggressively increased capacity to support the surging storage needs driven by AI inference, further squeezing consumer-grade AI storage. Major players like Micron have even cut back on consumer support, almost fully shifting toward AI.

“Overseas giants definitely won’t care about consumer-grade; they’ll do whatever is profitable. All capacity is shifting to HBM,” said the aforementioned storage industry insider.

He emphasized that domestic storage manufacturers also have a task to support local clients, beyond just following market trends.

But if we look at market-driven factors, “aggressive” Micron could also become a regulator of supply.

“Micron hasn’t entered NVIDIA’s HBM4 supply chain, and making DDR5 profits isn’t much lower than HBM’s.” said the storage industry researcher.

However, the likelihood that GPU giants will adjust demand to release more storage capacity is slim—NVIDIA’s Jensen Huang has even personally negotiated with Samsung to expand HBM capacity, and Huang publicly stated that NVIDIA will use as much storage capacity as available.

NVIDIA and AMD are demanding as much storage as needed, including HBM based on DRAM, as well as NAND storage driven by inference tasks like programming and OpenCL.

“KV Cache storage, user history context, RAG—these are old topics, but as agents emerge, storage needs are multiplying,” said a domestic AI infrastructure professional. “After the release of Anthropic’s Sonnet 4.5, capabilities in coding, agents, and tool invocation have all improved significantly. Plus, the ‘shrimp farming’ trend is still fermenting and growing.”

Therefore, even though industry expectations suggest storage prices might stabilize in 2027 or 2028, the expanding AI demand and the lack of support for consumer markets mean the storage industry will never return to the way it was. As investor Chen Qi said, only if capital stops betting on AI will this change.

Of course, another possibility is the day the AI bubble bursts.