A looming global shortage of key memory components threatens to upend the smartphone market, potentially leading to price hikes of 20-30% or diminished device capabilities as early as next year. the warning comes from Nothing CEO Carl Pei, who points to surging demand from the artificial intelligence sector as the primary driver of the crisis. This shift could mark the end of an era of consistent smartphone upgrades without corresponding price increases, impacting consumers across multiple device categories-and manufacturers offer no immediate relief in sight, with projections indicating the situation won’t improve before 2028.
The situation is not expected to improve before 2028.
Smartphone consumers could face significantly higher prices or reduced features as early as 2026, according to warnings from Nothing CEO Carl Pei. The executive predicts companies will either need to increase prices by 20-30% or compromise on device specifications to navigate a challenging market environment.
Pei detailed the issue in a lengthy post on X, titled “Why your next phone will be more expensive,” explaining a surge in demand for memory – both DRAM and NAND flash – is driving up costs across the consumer electronics sector. This development signals a potential shift in the long-standing trend of annual smartphone improvements without corresponding price increases.
Components that cost less than $20 just a year ago are now projected to reach at least $100 by the end of 2026, Pei stated. The primary driver behind this price escalation is the rapid expansion of artificial intelligence infrastructure. Major players in the AI space are pre-emptively securing large volumes of memory chips for data centers, limiting supply and pushing prices higher for smartphone manufacturers.
Faced with these rising component costs, manufacturers have limited options. They can either pass the increased expenses onto consumers through higher retail prices – potentially exceeding a 20% increase – or reduce the technical specifications of new models to maintain existing price points. The situation underscores the increasing impact of the AI boom on other tech sectors.
According to Pei, this confluence of factors has “broken the model” of consistent smartphone upgrades without price hikes, fundamentally altering the competitive landscape. “Nothing” itself will not be immune to these pressures, with the company confirming that smartphone prices planned for release in the first quarter of 2026 will be higher. The company intends to maintain quality and transition to a faster memory type (UFS 3.1) rather than cutting corners on specifications.
This shift is expected to disproportionately affect the affordable and mid-range segments of the market, where competition traditionally centers on delivering the most features for the lowest price. Pei suggests that 2026 will mark “the end of the specs race.”
However, Pei views the situation as a “perfect opportunity” for Nothing, as the company has historically prioritized user experience and design over solely focusing on technical specifications. This strategic differentiation could allow Nothing to navigate the changing market dynamics more effectively.
Beyond smartphones, consumers may also see price increases for other devices reliant on memory chips, such as laptops, as the global crisis unfolds. No improvement in the situation is anticipated before 2028, according to the company.
