iPhone's price twist exposes smartphone price pain

Apple's 2026 pricing strategy for older iPhones in India has caused a stir, with the tech giant raising prices instead of lowering them. This shift exposes the mounting challenges faced by smartphone manufacturers as they grapple with soaring component costs. The iPhone 17, for instance, now costs Rs 99,900, up from Rs 82,900, while the iPhone 17e has risen to Rs 79,900 from Rs 64,900, and the iPhone Air has climbed to Rs 1,49,900 from Rs 1,19,900.

This unexpected price hike contradicts Apple's typical pricing model, where new models displace older ones at lower price points. In India, this pattern had previously helped Apple maintain stable prices across multiple iPhone generations. However, this year, Apple has opted to raise older model prices, leaving consumers with less affordable alternatives.

The root cause of this price surge lies in the semiconductor industry's struggle with memory chip costs, driven by the rapid growth of AI data centers. As memory chips become increasingly essential for AI infrastructure, demand has surged, causing prices to soar. This shift has forced consumer electronics manufacturers to reassess their pricing assumptions, as older technology is no longer guaranteed to become cheaper.

Apple's decision to increase prices on older iPhones is particularly noteworthy, given the company's position at the premium end of the smartphone market. However, the issue is not limited to Apple alone. Deloitte warns that rising memory prices are starting to impact demand expectations for consumer devices, potentially leading to a decline in smartphone sales in 2026.

Smartphone manufacturers now face a dilemma: absorb the higher costs, absorb the costs and accept lower margins, or pass the costs onto consumers while potentially compromising other aspects of their devices.