Your Next Smartphone Is Getting More Expensive(And the CEO Who Warned You First Says It Gets Worse Before It Gets Better)

Xiaomi’s Lei Jun has been raising the alarm since October 2025. Memory chip prices have surged 80 to 90% in a single quarter. Gartner says smartphones could cost 13% more in 2026. The mid-range phone you relied on for value is the hardest hit segment. And the crisis runs until at least 2027.

Photo by Gilles Lambert on Unsplash

In October 2025, Xiaomi founder Lei Jun posted on social media complaining about how far memory chip prices had risen. It was an unusual thing for a tech CEO to do publicly. It was also a warning most people outside the electronics industry did not take seriously.

Seven months later, the warning has fully materialized.

Speaking at the launch event of the Xiaomi 17 Max this week, Lei Jun told media that the cost of memory chips is expected to continue increasing for at least the next two years, putting additional pressure on the smartphone industry. He said users who regularly upgrade their phones every year may want to consider buying sooner rather than later.

Xiaomi President Lu Weibing put a specific timeline on it. The current round of memory price increases may continue until at least the end of 2027, with the possibility of the trend extending into 2028.

The reason your next phone costs more has nothing to do with the phone. It has to do with a data center that needs a type of chip your phone also uses, and is willing to pay significantly more for it than your phone manufacturer can.

You: “Why is my new phone 13% more expensive than last year?”

The answer: A data center needed the memory chip that was supposed to go in your phone. This continues until at least 2027.

Your phone: now sharing a supply chain with a $200 billion AI infrastructure buildout!

What Is Actually Happening to Memory Chips

Memory chips are not a single product. There are two types relevant to this story.

DRAM, dynamic random access memory, is the chip that determines how fast your phone can run multiple applications at once. NAND flash is the chip that determines how much storage your phone has. Both are now being diverted at unprecedented scale toward a different buyer: AI data centers.

Producing one gigabyte of high-bandwidth memory, the type AI accelerators need, consumes three times the wafer capacity of the standard memory found in consumer smartphones. By 2026, AI is consuming over 20% of global DRAM wafer capacity. Samsung, SK Hynix, and Micron, the three companies that produce the overwhelming majority of the world’s memory chips, have all shifted manufacturing capacity toward high-margin AI applications.

The result is a supply crunch for everything else.

Memory prices surged between 80% and 90% in the first quarter of 2026, according to Counterpoint Research. This surge has been driven by a shortage of memory chips with supply being directed toward data centers for AI. TrendForce puts conventional DRAM contract price increases at 90 to 95% quarter-over-quarter in Q1 2026, with NAND flash up 55 to 60% in the same period.

For a low-end phone priced at $200, typical storage configurations are expected to drive a 25% quarter-on-quarter increase in total bill-of-materials cost for Q1 2026, with storage devices potentially accounting for up to 43% of the total cost of building the phone.

A chip that used to represent 10 to 18% of what it costs to build a smartphone now represents more than 20% and climbing!

What Xiaomi Is Telling You That Other Companies Are Not

Lei Jun is not the only smartphone CEO dealing with this crisis. He is the one being most direct about it.

Lu Weibing predicted that several premium flagship smartphones from Chinese brands could officially cross the 10,000 yuan, approximately $1,470, mark by the end of this year. He also claimed that the current round of memory price increases may continue until at least the end of 2027, with the possibility of the trend extending into 2028.

Samsung’s Galaxy S26 series launched at a price 1,000 yuan higher than its predecessor. Major domestic brands including Oppo, OnePlus, and Honor adjusted their retail prices in March to match manufacturing cost increases. Xiaomi confirmed that three of its current models would see price increases of approximately 200 yuan, roughly $29, starting immediately.

Xiaomi’s Redmi K90 smartphone launched with a price 400 yuan higher than the prior model with the same configuration. In 2025, the Redmi K90 series was raised 300 to 600 yuan but was quickly cut by 300 yuan after market feedback. That buffer is gone now.

Xiaomi’s Lu Weibing described memory prices as surging at a magnitude “beyond imagination” during the company’s Q4 2025 earnings call, warning that the price-raising cycle could force some smartphone makers into closure. The company reported that spending on memory components for a standard configuration had almost quadrupled year-on-year, adding roughly 1,500 yuan in extra cost per handset.

Lei Jun said Xiaomi will try to absorb some costs rather than fully passing them to consumers. However, Xiaomi’s inventory cycle is roughly 70 to 80 days. As low-cost inventory is depleted, newly purchased components at higher prices will directly impact gross margins. The cushion is shrinking. The math eventually catches up.

The Mid-Range Phone Is the Real Victim

This is the part of the story that matters most for most consumers and gets the least coverage.

For years, the mid-range smartphone, the $400 to $600 category, was the sweet spot for most consumers. You got 80 to 90% of the flagship experience for 50% of the price. But the AI memory crisis is hitting this segment the hardest. Flagship phones have enough profit margin to absorb some of the rising chip costs. Budget phones can simply cut features until they hit a price point.

The mid-range phone has nowhere to go. It cannot absorb the cost without destroying its margin. It cannot cut features without losing its value proposition. The consumer who chose mid-range precisely because they didn’t want to pay flagship prices is now being squeezed from both ends.

If you buy a $600 laptop in late 2026, there is a high probability it will ship with 8GB of RAM, a specification that was considered entry-level five years ago. You will be paying 2026 prices for 2021 internals.

Gartner forecasts smartphone prices could rise 13% in 2026. IDC forecasts the smartphone market to decline 12.9% in 2026 as a result of the chip crunch. Those two numbers tell a consistent story.

Prices go up. Volume goes down. The consumers who cannot afford the higher prices leave the market. The companies selling to them take the hit.

The Companies Nobody Is Talking About

The memory crisis is creating an unexpected opening for Chinese chipmakers who were previously considered second-tier.

Chinese firms like ChangXin Memory Technologies and Yangtze Memory Technologies are gaining market share by serving smaller clients as industry leaders focus on AI infrastructure. ChangXin launched China’s first DDR5 chips in 2025.

Samsung, SK Hynix, and Micron are chasing the highest-margin buyer, which is the AI data center. That leaves a gap in the conventional consumer memory market. ChangXin and Yangtze Memory are filling it. The memory crisis that is raising your phone prices is simultaneously accelerating China’s domestic chip industry in a way that US export restrictions were designed to prevent.

The geopolitical consequence of the AI memory supercycle has received almost no coverage in mainstream financial media. The AI infrastructure buildout is not just affecting your phone price. It is reshaping who controls the supply chain for consumer memory chips over the next decade.

When Does It End

IDC forecasts that memory supply challenges will persist throughout 2026 and may extend into 2027. Although the pace of memory price increases is expected to slow in the second half of this year, prices will continue to rise and remain at high levels.

Synopsys CEO Sassine Ghazi indicated memory shortages would persist until 2027. Lu Weibing, who has been the most specific on timing, says the trend could extend into 2028.

The structural reason it will not resolve quickly is straightforward. Building new memory chip manufacturing capacity takes three to five years and billions of dollars in capital expenditure. Samsung, SK Hynix, and Micron are not going to build new fab capacity for conventional consumer memory when high-bandwidth memory for AI is generating significantly higher margins. The incentive structure points away from solving the consumer shortage.

The Wall Street Journal reported in January that data centers would consume more than 70% of high-end memory chips produced in 2026. That share does not reverse without either a significant slowdown in AI infrastructure investment, which nothing in the current spending trajectory suggests, or a major expansion in total memory manufacturing capacity, which takes years to build.

My Take

Lei Jun deserves credit for being the first major smartphone CEO to say this publicly, in October 2025, before most of the industry acknowledged it. He was not being alarmist. He was describing a supply chain reality that has since been confirmed by Counterpoint Research, TrendForce, IDC, Gartner, and every other major analyst covering the sector.

The core problem is a collision between two investment cycles on very different timescales. AI infrastructure investment moves fast. Companies commit hundreds of billions of dollars and want results within 12 to 18 months. Memory chip manufacturing capacity moves slowly. New fabs take three to five years to build and require decisions made years before the demand is visible.

The companies that control the memory supply, Samsung, SK Hynix, and Micron, made a rational economic decision to prioritize AI customers. They pay more, they sign longer contracts, and they are backed by companies with essentially unlimited capital commitments. The consumer electronics market cannot compete with that on margin.

The person who pays the price for that rational economic decision is the person trying to buy a mid-range smartphone in 2026. They are not on the spreadsheet of whoever decided to divert memory chip capacity to AI data centers. They are the externality. And the externality runs until at least 2027, possibly 2028, with no structural mechanism currently in place to resolve it faster.

The geopolitical dimension makes it worse. The memory crisis is accelerating Chinese domestic chip production in a segment that was supposed to remain dependent on Western suppliers. That is not a consequence anyone planned for. It is what happens when a supply shock meets an industrial policy gap.

Lei Jun said buy sooner rather than later. He has been right about this longer than anyone else in the industry. That is worth taking seriously.

Questions Worth Sitting With

Samsung, SK Hynix, and Micron have all prioritized AI customers over consumer electronics manufacturers. What obligation, if any, do dominant suppliers in a critical technology market have to maintain supply balance across customer segments?

The memory crisis is accelerating China’s domestic chip industry in exactly the segment US export restrictions were designed to limit. Has anyone in Washington modeled this consequence, and is anyone acting on it?

IDC projects smartphone volumes could decline 12.9% in 2026. If the mid-range market contracts affect significantly, which consumers are most affected, and what does that mean for digital access in lower-income markets where mid-range devices are the primary point of entry?

Lei Jun warned publicly about this in October 2025. The mainstream financial press began covering it seriously in early 2026. What is the accountability mechanism for supply chain risks that are visible months before they materialize but receive no policy attention until they affect consumer prices?

If memory prices remain elevated until 2028 and new fab capacity is three to five years away, what does the smartphone market look like structurally on the other side, and which companies survive the compression?

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Follow for AI supply chain economics, consumer technology, and what the press release doesn’t say.

This article reflects my personal analysis and opinions based on publicly reported information. I’d be more than happy if you share your opinion.

Sources:

• Gizmochina: “Xiaomi CEO warns buyers not to wait too long for new smartphones,” May 22, 2026.
• Reuters: Xiaomi smartphone price warning, November 2025
• Reuters: Smartphone market set for biggest-ever decline in 2026 on memory price surge, IDC says
• CNBC: “Xiaomi launches flagship smartphone as memory price surge threatens sales,” February 28, 2026.
• BigGo Finance: “Xiaomi Announces Smartphone Price Hikes,” April 3, 2026.
• Android Headlines: “Why Your Next Smartphone Will Be Significantly Pricier,” January 28, 2026.
• Caixin Global: “Memory Shortage Creates Space for China’s Lesser-Known Chipmakers,” December 23, 2025.
• Technetbooks: “Xiaomi Smartphone Price Increase 2026,” April 3, 2026.
• Dotdotnews: “Two Sessions 2026: Xiaomi’s Lei Jun on memory chip price surge,” March 5, 2026.
• Tracking memory price increases across the last several quarters
• Gartner: 13% smartphone price increase forecast 2026
• Wall Street Journal: data centers to consume over 70% of high-end memory chips in 2026, January 2026
• Synopsys CEO Sassine Ghazi: memory shortages persist until 2027, confirmed via CNBC