Nothing CEO Says Phone Prices Are Going Up as Memory Costs Surge 300%

Memory has overtaken the processor and display to become the single most expensive component in a smartphone, Nothing CEO Carl Pei warned this week, and he says phone prices are going up and will keep rising into next year. That claim matters beyond Nothing's own lineup: independent market data from IDC puts the memory shortage at the center of what it calls the steepest smartphone market contraction in recorded history.

Pei has a commercial interest in managing consumer expectations, worth stating plainly upfront. But his read on the supply situation lines up with IDC's forecasts closely enough that the numbers deserve attention on their own terms.

Why phone prices are increasing: memory now costs more than the processor

The squeeze starts with AI infrastructure. Major technology firms are reserving memory and semiconductor capacity for AI data centers, which limits what's available for smartphone manufacturers, Pei said in a post on X, reported by The Verge this week. The compounding problem is structural: in a shortage, memory is allocated by suppliers rather than purchased on demand, so phone makers can't simply stock up to ride it out.

The price movement he describes is steep. Memory modules that cost under $20 a year ago could exceed $100 in premium smartphones by year-end, a potential 400% increase, with overall memory prices already up as much as 300% in some cases, per The Verge. His own Phone (4a) shows what that looks like in practice: memory costs doubled between when Nothing decided to build the device and when it launched, then doubled again after.

IDC's independent analysis confirms the broader pressure. "The deepening memory shortage crisis remains the dominant force behind the record 14% drop this year, but it is no longer the only one," said Nabila Popal, Senior Research Director with IDC's Worldwide Quarterly Mobile Phone Tracker. The US-Iran war has added rising oil and transport costs on top of the memory crunch, compounding the damage without being the root cause, per IDC.

Global shipments are forecast to fall 13.9% in 2026 to 1.09 billion units, the lowest volume since 2013 and the sharpest annual contraction the industry has ever recorded, IDC projected last month.

What manufacturers can actually do about it

Faced with sharply higher memory costs, phone makers have two options: raise prices or downgrade specs. Neither is good for buyers. Some brands may need to increase handset prices by 30% or more, while others will reduce RAM and storage configurations to hold their price points, Pei warned, according to The Verge. Either way, buyers get less value at any given tier.

The inflation is already showing up in the market. New phones have been launching up to $100 above their predecessors since February, and in India, handsets above ₹30,000 have risen by ₹7,000 or more compared to the previous generation, The Verge reported. Nothing expects price increases across its own lineup, particularly for devices moving to UFS 3.1 storage in early 2027. Samsung and Google are also expected to raise prices on upcoming models, though neither has made a formal announcement.

The macro number is harder to dispute. The global average smartphone selling price has hit a record $550 this year, up $100 from 2025, as vendors pull back from the low end and concentrate volume at higher price tiers, IDC reported. For buyers, that translates directly: thinner holiday discounts, weaker specs at familiar price points, and a sub-$300 market that will deliver less than it did a year ago. Pei was blunt about the sale season this year's discounts won't be what people are used to, he told The Verge.

Budget markets face the worst of it; scale players gain ground

The pain is not distributed evenly. The sub-$200 segment will shrink the most, and the sub-$100 category, which represented over 170 million devices in 2025, may become economically unviable as memory and NAND costs settle at a permanently higher floor, even after supply begins normalizing around 2028, IDC forecast. Android as a whole is projected to see a 20% year-on-year shipment decline.

The regional picture is stark: markets with the highest concentration of budget devices face the sharpest contractions. Middle East and Africa is forecast to drop 23%, Central and Eastern Europe 19%, and parts of Asia Pacific 14%, per IDC. Smaller Android brands in those regions, without the supply use or capital reserves to absorb cost pressure, face not just contraction but potential market exits. Pei separately estimated that entry-level and mid-range segments could shrink by more than 20% industrywide, The Verge noted.

At the top of the market, the opposite is happening. Apple secured memory supply early and is now projected to limit its shipment decline to 5.2%, a significant divergence when most of the market is falling sharply, with iOS on track for its highest-ever annual market share at 22%, IDC found. "The shift in market share that follows from this crisis will benefit Apple more than any other vendor," said Francisco Jeronimo, Vice President for Worldwide Client Devices at IDC. Samsung, also benefiting from secured supply and aggressive mid-range positioning, is expected to grow share by absorbing demand that smaller Android brands can no longer serve at competitive prices.

"For consumers, it means the era of ultra cheap smartphones is over," Popal said. "For vendors, it means only those that can adapt their strategies to this new cost environment and sustain demand at elevated price points will survive."

A cost reset, not a cycle

IDC does not expect average selling prices to return to 2025 levels within its forecast horizon. Global shipments are projected to decline a further 1.1% in 2027 before a partial 5.5% rebound in 2028 as memory supply begins to normalize, per IDC. Smartphones may not get meaningfully cheaper even by 2027, with sale-season discounts likely thinner than buyers have come to expect, India Today reported on Pei's warning earlier this week.

What to watch over the next 18 months: which mid-range brands quietly cut specs rather than raise sticker prices, making the value erosion harder to spot; which smaller Android vendors in emerging markets fail to hold margins and exit; and whether Apple and Samsung's supply-side advantage compounds further into 2027. "The next 18 months will determine who emerges from this reset with a sustainable position and who does not," IDC wrote.

Pei's closing advice to consumers was equally direct. "If you're planning to upgrade your phone," he wrote, "the best time was yesterday, and the next best time is now."