Smartphone Market To Shrink 15% This Year Due To Memory Crisis

CCS Insight expects global smartphone shipments to fall 15% this year as AI-driven demand pushes memory manufacturers toward higher-margin server chips. "[S]ome entry-level devices have already seen their sticker prices go up by more than 50 percent since last year," reports The Register. From the report: The firm found that the primary smartphone market (meaning new devices) contracted 4.4 percent in the first quarter of this year, despite sales channels front-loading (meaning stockpiling) product inventory, as device prices begin to rise sharply. As CCS notes, this casts an ominous shadow on the outlook for the rest of the year, and it seems things have worsened since The Register first started reporting on the smartphone memory woes. Back in January, the forecast was for handset price rises of 6-8 percent, while the most pessimistic outlook was that the global market might contract as much as 5.2 percent. By February, analysts were expecting to see a decline in shipments of around 8 percent across the global market, and for prices to increase by about 14 percent. The root cause of all this is the AI craze, which has seen huge demand for high-performance GPU-filled servers to process it all. Chipmakers have moved to capitalize on this by prioritizing production of high-margin memory components for those servers, rather than making the plain old DRAM and NAND needed for PCs and phones. "The memory chip crisis shows no sign of slowing down in the near future, ramping up the pressure on manufacturers and consumers. Memory components now account for more than 30 percent of a manufacturer's bill of materials in some smartphones." said CCS research analyst Ben Hatton. "The full impact has yet to be felt in many regions, but it's clear that device prices will accelerate over the rest of the year."

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