Smartphone Makers Squeezed by Soaring Chip Costs

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Apple and its smartphone rivals face a dilemma caused by soaring memory and logic costs that leaves them two choices: swallow losses or fight a pyrrhic battle for market share.

Average selling prices (ASPs) for smartphone memories such as DRAM have quadrupled, while ASPs for NAND have tripled in the last twelve months, according to an Aug. 11 report by market research firm Counterpoint. Moreover, Apple is moving to TSMC’s latest 2-nm node, one of the foundry’s most expensive, for its A-series SoCs in the latest iPhone 18 series, Counterpoint co-founder Neil Shah said in the report. TSMC has repeatedly increased wafer prices across its leading nodes, putting further pressure on Apple, once TSMC’s largest customer, the report said.

“Apple no longer commands the buying power it once did,” Shah said. “Pricing pressure will intensify from here, and conditions do not seem likely to improve for at least the next 18 months.”

Memory pricing is “running hot” because of high demand from AI data centers and limited supply, SemiAnalysis analyst Sravan Kundojjala told EE Times.

“Apple isn’t immune to cost increases and has already started passing on increased costs to consumers to protect its margins,” he said.

Apple didn’t respond to EE Times before we went to press with this report.

Abdicating the crown

TSMC’s AI customers, such as Nvidia and AMD, have been driving up silicon prices since last year, even more than Counterpoint predicted at the time. Early this year, TSMC said it is unable to keep up with AI chip demand. AI accelerators made by Nvidia and AMD accounted for a high-teen percentage of TSMC’s total revenue in 2025. In the second quarter of this year, AI chip revenue swelled to 66% of TSMC’s total sales.

High-performance computing (HPC) is TSMC’s term for its AI business segment.

Smartphone companies are no longer price-makers, a luxury they inherited after the iPhone took off nearly two decades ago, TechInsights vice chair Dan Hutcheson told EE Times.

“AI chipmakers have taken this crown,” Hutcheson said. “Average IC ASPs are up 28% since the start of the Iran War, versus only 8% for Brent crude oil.”

The price surge will shrink smartphone unit sales this year, International Business Strategies CEO Handel Jones told EE Times.

Smartphone shipments will drop to 950 million units in 2026 from 1.2 billion in 2025, Jones said.

“The increase in DRAM prices is the biggest factor in the decline,” Jones noted. Apple’s silicon cost at the 2-nm node will be $80, increasing 10 times from decades ago when Apple was using TSMC’s 28-nm node, he added. A 2-nm wafer from TSMC will exceed $30,000, Jones said.

Consumers will have to eat the expected smartphone price increases, he noted.

“Consumers will have to pay higher prices for smartphones, but smartphones are as essential as food for many people,” Jones said.

For Apple, raising iPhone prices will not have a direct impact on its market share, because all its competitors are in the same boat, which rises with the inflationary tide, Hutcheson said.

“Other smartphone makers will inevitably have to raise prices too,” he added.

CXMT

The increase in memory prices provides a chance for China’s ChangXin Memory Technologies (CXMT) to grab market share from memory incumbents Samsung, SK Hynix, and Micron, according to Jon Peddie, founder of Jon Peddie Research.

“Memory prices have gone up for everyone, Apple is no exception, and [that’s] an indication of why they are investigating working with CXMT for DRAM,” Peddie said.

Samsung, Micron, and SK Hynix maintain their pricing power because they understand CXMT’s capacity is constrained and that its output is likely prioritized for Chinese domestic customers, Shah said.

CXMT is on the U.S. Department of War’s Section 1260H list as a Chinese military-linked company, though it is not fully banned under a strict Commerce Department Entity List trade embargo.

Winners and losers

Samsung may be one of the few smartphone makers that’s shielded from the price hit. The company makes its own memory and logic chips. Samsung benefits from the surge in memory prices that have recently yielded profit margins in the 80% range for the company.

Samsung can be a winner because of its internal supply of DRAM and NAND, Jones noted. The company also makes its own Exynos smartphone processors.

Chinese smartphone makers such as Xiaomi are more exposed to the price crunch, Jones added.

Xiaomi’s average price for smartphones in 2025 was about $160, he said.

“It’s obviously impossible to maintain this type of low-cost business model,” Jones said.

Apple and Samsung, the dominant smartphone brands, are best positioned to maintain profitability amid the price crunch.

The mid- and entry-level 4G/5G smartphone makers are taking a hit as they have limited supply leverage, but premium-tier companies such as Apple and Samsung can afford to maintain or even gain share in the declining overall market, Kundojjala said.

“The big brands always win,” Peddie said. “It’s the law of the jungle.”

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