With memory chip prices, a key driver of smartphone manufacturing costs, surging, the bill of materials (BoM) for smartphones in the first quarter rose more than 20% from the previous quarter, an analysis showed. After the cost shock, the global smartphone industry appears all but certain to raise product prices.
According to market research firm Counterpoint Research on the 11th, as of the first quarter, mobile DRAM prices jumped more than 50% from the previous quarter, and NAND flash prices soared more than 90% from the previous quarter, continuing their upward trend. As a result, total smartphone component cost expense is tallied to have increased more than 20% from the previous quarter.
The sharp rise in component prices is fundamentally shaking up the cost structure of smartphones. The budget smartphone market, which has thin margins, is getting hit the hardest.
In the sub-$200 wholesale budget segment, when equipped with 6 gigabytes (GB) of DRAM and 128GB of NAND, total manufacturing cost in the first quarter was estimated to have risen 25% from the prior quarter. In this case, memory expense accounts for as much as 43% of the total cost.
In the $400–$600 midrange smartphone segment, based on 8GB of DRAM and 256GB of NAND, the cost share of DRAM and NAND in the first quarter recorded 14% and 11%, respectively. This is expected to climb to 20% and 16% in the second quarter.
Premium and flagship models priced above $800 wholesale are facing dual cost pressure from high-capacity memory and the adoption of the latest 2-nanometer-class mobile application processors. Counterpoint Research projected that for flagship models with 16GB of the latest DRAM and 512GB of NAND, total cost will rise by about $100 to $150 by the second quarter of this year. In this case, DRAM would account for 23% of total cost, and NAND for 18%.
Xianghao Bai, a senior analyst at Counterpoint Research, said, "With memory prices rising sharply, relying on traditional expense-cutting methods alone will have limited effect," adding, "smartphone retail price hikes are inevitable going forward." Bai also said, "Budget smartphones will see a $30 increase, and some premium flagships will see $150–$200 price hikes."
Manufacturers have begun to adjust strategies to defend against worsening profitability. Counterpoint Research said smartphone makers are trimming expected shipments of budget models with heavy cost burdens and lowering specifications for components not directly tied to core features.
Senior analyst Xianghao Bai said, "This year, smartphone companies will struggle to balance worsening profitability from rising component costs with their shipment targets," adding, "Companies pursuing market-share expansion with budget models could face short-term loss risks."