AI Race for Memory Chips Drives High Prices for Tech

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The artificial intelligence race is gobbling up memory chips and sending prices soaring. Now the war in Iran threatens to make those problems worse. The smartphone and PC industry is bracing for impact.

A shifting tech marketplace

Say goodbye to the current crop of budget smartphones and PCs. Basic smartphones that run less than $200, which are popular in emerging markets, will go the way of the dodo. The same is true for PCs. "Ultimately, we expect the sub-$500 entry-level PC segment will disappear by 2028," says Ranjit Atwal, an analyst at Gartner, in a recent statement. The tech market research firm estimates smartphone and PC memory-chip prices will more than double by the end of this year compared with 2025.

"Budget smartphones and entry-level PCs operate on razor-thin margins, leaving vendors with little room to absorb price increases," according to an analysis from tech market research firm IDC.

To cope with higher memory prices, smartphone sellers could reduce random access memory (RAM) by one-third and storage by half for base model phone configurations, says IDC. Ditto for budget-friendly PCs, as vendors look for ways to deal with higher prices without fully absorbing the cost.

A similar dynamic is at play for higher-end devices, with higher prices and perhaps stingier memory offerings. Apple and Samsung, the top phone sellers, are well-positioned to cope with the shortage because of their huge buying power and supply chain expertise.

Meanwhile, PCs designed for artificial intelligence will stumble, as higher prices slow adoption.

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Global electronics sales are sinking

The memory shortage will cause global smartphone shipments to plunge nearly 13% in 2026 versus last year, and PCs to fall 11%, predicts IDC. That’s the biggest drop in a decade or so. Expect shortages to ripple through all sorts of consumer electronics, including tablets, virtual-reality headsets, wearable devices, gaming consoles and action cameras.

Businesses and consumers are sure to hang on to PCs and phones longer, balking at the higher prices of new models. But memory prices aren’t falling back to 2025 levels. Even in 2027 or 2028, memory prices figure to stabilize rather than start declining.

The war in Iran could exacerbate memory shortages and hike prices further, while souring consumer and business sentiment. Energy price increases would lead to higher prices of chips and electronics, and supply chain disruptions in the Middle East could reverberate globally. A prolonged conflict could cause "consumers to delay purchases of PCs, tablets, smartphones and other devices," according to an analysis by IDC.

Tips for shoppers looking for tech

Check the tech specs carefully before buying to make sure memory is adequate, rather than looking at price alone.
Consider getting the minimum requirements for AI software.
Check out top smartphone sellers’ budget models, such as Google’s Pixel 10a ($500) or Apple’s iPhone 17e ($600). The tradeoff is usually a less powerful chip, a lower resolution camera and smaller screen size.
Look for deals on computers in August, September, November and December — the best times to buy, according to nonprofit Consumer Reports.
Don’t forget to look for trade-in offers for old smartphones and PCs. Smartphone manufacturers, carriers and other outlets are competing to get old phones back so they can resell them.

Meanwhile, Apple fans have a new option to cope with higher PC prices. The recently unveiled $600 MacBook Neo is by far the cheapest laptop in Apple’s lineup. It runs on a less powerful 2024 iPhone chip and is sure to see strong sales.

Opt for used models

Used smartphones sold by phone manufacturers, carriers and retailers are more popular than ever. Certified pre-owned models, which undergo a rigorous inspection and repair process, are an increasingly popular option. The used market offers cheaper devices, but as consumers hang on to phones longer, the inventory is older than usual.

The Iran conflict also "extends to the refurbished market," writes Ahmad Shehab, an analyst at Counterpoint Research, in a recent post. “Spare parts used in refurbishment spaces are largely shipped by sea,” and disruptions in the Middle East could affect the supply chain.

"I do believe that the supply of new devices will tighten," says Sean Cleland, head of mobile division at B-Stock, an online overstock marketplace that deals with big volumes of used phones. But if trade-in offers for smartphones continue to be aggressive, which seems likely, that could keep used device supplies healthy.

It’s still going to be a deal, even if prices increase for pre-owned devices, says Cleland. Consumer trust in used devices has gone up over the years, and the industry is even working on a standard for testing and grading, akin to a Carfax for used phones.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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John Miley is a Senior Associate Editor at The Kiplinger Letter. He mainly covers AI, technology, telecom and education, but will jump on other business topics as needed. In his role, he provides timely forecasts about emerging technologies, business trends and government regulations. He also edits stories for the weekly publication and has written and edited email newsletters.

He holds a BA from Bates College and a master’s degree in magazine journalism from Northwestern University, where he specialized in business reporting. An avid runner and a former decathlete, he has written about fitness and competed in triathlons.