Memory prices surge again… suffocating smartphone 'cost' competition

Contract prices for mobile DRAM are expected to continue rising through the third quarter of this year. Memory semiconductors (hereinafter referred to as memory) are projected to account for the largest share among major components in smartphone manufacturing costs. Since price increases in memory will be reflected in finished product costs with a time lag, cost pressure on manufacturers is expected to intensify further.

According to market research firm TrendForce on the 12th, contract prices for LPDDR (Low Power Double Data Rate) 5X in the second quarter rose by 78% to 83% compared to the previous quarter. The previous generation, LPDDR4X, also increased by 70% to 83%. TrendForce forecasts that LPDDR prices will rise an additional 8% to 13% in the third quarter. LPDDR is low-power DRAM primarily mounted on mobile devices such as smartphones.

Typically, smartphone manufacturers negotiate prices and supply volumes with memory suppliers in advance to sign contracts. Since a certain period is required from actual component procurement to finished product production, contract price fluctuations are not immediately reflected in finished product costs. As mobile DRAM contract prices continue to rise, analysts predict that cost burdens on smartphone manufacturers in the second half of this year will grow even larger.

The share of memory in smartphone manufacturing costs has also expanded significantly. TrendForce analyzed that the share of memory in iPhone bill of materials (BOM) costs will rise from about 10% last year to approximately 34% in the third quarter of this year, and is estimated to expand to around 40% by the first half of next year. This exceeds the level of existing core components such as AP (Application Processor) and displays. Market research firm Counterpoint Research predicted that in the third quarter smartphone BOM, the share of SoC (System on Chip) including AP and displays would be 24% and 7%, respectively.

The impact is more severe for budget smartphones. Market research firm Omdia warned that memory costs for smartphones under $100 could surge by up to 400% by the third quarter of 2026. Budget products have low selling prices, making it difficult to absorb cost increases internally or pass them on to product prices, so defending profitability is not easy. Omdia stated, "Considering the increased costs, it is virtually impossible to manufacture smartphones under $100 and generate profits."

Samsung Electronics' MX (Mobile Experience) business unit, responsible for smartphone operations, also recorded its first quarterly loss since launching earlier this year. Samsung Electronics, which has a high proportion of mid-range and entry-level sales, faces significant profitability pressure due to rising memory prices. It is also not easy to shrink the entry-level market in order to defend shipment volumes and global market share in emerging countries. Noh Tae-moon, head of Samsung Electronics' DX (Device Experience) division, emphasized at a press conference for 'Galaxy S26' held in London, UK, on the 22nd last month (local time), that "operating a diverse product lineup from flagship to mid-range and entry models is both a strength and an obligation of Samsung Galaxy."

Rising memory prices are also highly likely to lead to smartphone price hikes. If cost increases are passed on to product prices, consumer burdens will grow, potentially exacerbating demand contraction. Omdia forecast that global smartphone shipments this year would decline by 12% compared to the previous year. An industry official said, "Rising memory prices are going beyond temporary levels and are fundamentally changing the smartphone cost structure itself," adding, "It will be inevitable to respond by raising prices or adjusting product specifications and lines to protect profitability."