Smartphone Market Hits 13-Year Low Amid Chipflation
A surge in demand for memory semiconductors, centered on artificial intelligence (AI) servers, is affecting even the smartphone market. This is because consumers are closing their wallets as smartphone manufacturers reflect the increased component costs caused by rising memory prices in their produc
The smartphone industry has experienced a record low in third-quarter shipments, according to market research firm Omdia, marking its lowest level since 2013. The decline is primarily attributed to a surge in demand for memory semiconductors, driven by artificial intelligence (AI) servers. This has led to increased component costs, which in turn have caused smartphone manufacturers to raise prices, burdening consumers, particularly in emerging markets.
Africa reported the highest decrease in shipments at 39%, followed by significant drops in Asia-Pacific excluding Greater China (-26%), the Middle East (-27%), and Central and South America (-24%). Sanyam Chaurasia, a senior analyst at Omdia, noted that emerging markets, which once drove global smartphone shipment growth, are now facing the most pressure from rising prices. As a result, consumers are either delaying the replacement cycle or opting for refurbished devices.
Semiconductor companies have shifted production from general-purpose memory semiconductors to high bandwidth memory (HBM) for AI servers, as the latter yields higher profits. This shift has caused a shortage in general-purpose memory, leading to higher prices for PCs and smartphones. Apple CEO John Ternus recently described memory supply constraints as a "serious crisis" and suggested the company must review all options, including introducing Chinese semiconductors.
Moreover, Samsung Electronics projected that the cost burden on its smartphone business would persist due to rising prices of major semiconductor components. Counterpoint Research found that memory semiconductors (DRAM and NAND) now constitute 16% and 11% of the total bill of materials (BOM) in premium smartphones, up from 8% and 5% in the first quarter of last year.
By the third quarter of this year, these proportions are estimated to reach 25% and 28%, respectively. The market research firm predicts that global smartphone shipments will decrease by 12% this year compared to last year.
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