Smartphones May Get More Expensive in the Next Quarter
Smartphone users may have to shell out more money in the near future as smartphone prices are expected to rise starting from the June quarter. This increase in prices can be attributed to two main factors: the rising cost of memory chips and the strengthening of the Chinese yuan. However, recent import duty cuts may help partially offset these price hikes.
According to market researchers, Trendforce, there has been an upward trend in the prices of memory chips, specifically DRAM. Key suppliers of memory chips, Samsung and Micron, are expected to implement a price increase of 15-20% in the March quarter. This can be largely attributed to the tighter supply of DRAM in 2024, caused by the increased adoption of artificial intelligence and high-performance computing. Additionally, the gradual recovery of the smartphone and PC markets has contributed to the surge in memory chip prices.
Trendforce also reported that the estimated contract price increase for memory chips in the March quarter will be around 3-8% for products with abundant inventory, such as LPDDR4X or older manufacturing processes. In contrast, LPDDR5(X) appears to be in tighter supply, with projected contract price increases of 5-10%.
The impact of the price hike will be felt starting from the next quarter, as most smartphone vendors currently have sufficient inventory of components to supply products in the March quarter. An anonymous smartphone industry executive mentioned that memory prices are expected to surge by 10-15% due to high demand from the third week of February to the first week of March. If this happens, smartphone brands will be forced to increase prices. However, the recent duty cuts can help mitigate the impact to some extent.
In India, smartphone brands have shifted to conducting direct transactions with Chinese component makers in yuan instead of depending on dollar rates. This change has been prompted by the recovery of the Chinese yuan from a low of ₹11.32 in June 2023 to ₹12.08 in December, resulting in a 6.7% rise. This currency fluctuation has adversely affected brands that import Chinese parts.
As smartphone prices are expected to increase in the coming months, it remains to be seen how consumers will react to these changes. While import duty cuts may provide some relief, the rising cost of memory chips and the strengthening of the Chinese yuan pose significant challenges for smartphone manufacturers. Whether these price hikes will affect consumer demand and market dynamics in the long run remains to be seen.
