An AI-driven shortage of key components, especially memory and storage chips, has driven up the price of a range of electronics, including not only DDR5 memory kits and PC solid state drives (SSDs), but also things like game consoles, consumer laptops, and so forth. Will lower-priced smartphones be the next shoe to drop? It could be, according to a Google-translated MyDrivers report.

The site highlights the "continued explosion of demand" to keep AI data centers fed with memory chips, noting that DRAM pricing is significantly higher now than it was just a few short years (up 700% from 2022). This is putting pressure on downstream consumer electronics, and as a result, the site says smartphones priced under 1,500 Chinese Yuan will be more difficult to find next year.

According to the report, Micron and SK hynix dominate the DRAM industry and collectively account for 90% of the world's supply. Both chip makers are prioritizing wafer shipments to more lucrative AI server customers. The report mostly speaks in generalities, though we have seen plenty of evidence that this is the case, not the least of which is Micron's decision to phase out its consumer-facing Crucial brand to focus on AI customers.

The report rings a number of alarm bells, such as AI firms locking in long-term orders for memory and storage that will cause supply for consumer products to shrink even further. This, it says, will impact lower-cost smartphones, which typically feature DDR4 chips.

It is also mentioned that "storage material costs" for entry-level phones now account 60% of the production cost. We assume the translated report is talking about both memory and storage, as it goes on to state that phone makers are effectively being forced to cut back the amount of memory in lower-end models, as well as lean into the second-hand memory chip market.

We will have to wait and see what happens. We have already seen some unsettling trends, such as Apple raising prices on several Mac and iPad devices, including its budget MacBook Neo—the starting price went up from $599 to $699.

If you are looking for a silver lining, it's that there are plenty of lower-cost smartphones readily available on the market. Here are a few examples: