Smartphone prices may rise from next quarter; here's why

Planning to buy a new smart phone? Be ready to shell out more. The prices of smartphone is most likely to rise from the June quarter due to an increase in memory chip prices and strengthening of the Chinese yuan

Smartphone to become costly

However, the recent cut in the import duty on mobile phone components by the Indian government can slightly offset the price rise.

Also Read: Government slashes import duty on mobile phone spare parts to 10%

As per market researcher Trendforce, two key suppliers of DRAM (memory chips), Samsung and Micron are expected to implement a 15-20% price increase in the March quarter. The likely price rise of DRAM could be attributed to tighter supply of the memory chip following accelerated adoption of artificial intelligence and high-performance computing, along with a gradual recovery in smartphone and PC markets.

“For products where inventory is more abundant, such as LPDDR4X or those from older manufacturing processes, the estimated contract price increase will be about 3–8% for the quarter. In contrast, LPDDR5(X) appears to be in tighter supply, with projected contract price increases of 5–10%,” TrendForce said in a January report.

A top smartphone industry executive told The Economic Times that the price rise impact will be felt from next quarter as most of the vendors have adequate inventory of components to supply products in the March quarter.

“We anticipate a surge in memory prices, expected along the lines of 10-15% due to high demand in the third week of February to first week of March. If this happens, everyone will have to increase prices, but the recent duty cuts can help us nullify the impact to an extent,” the executive told the publication.

As per the industry expert quoted by The Economic Times, strengthening of Chinese Yuan could also impact the prices as smartphone brands in India have shifted to directly transacting with Chinese component makers in their local currency, yuan as against Dollar which was used earlier.

Yuan has recovered from a low of Rs 11.32 in June 2023 to Rs 12.08 in December, marking a 6.7% rise.

Impact on demand

Meanwhile, market trackers have warmed that an increase in end-prices may hurt demand which is just starting to show signs of resurgence. So, a way out for brands could be to offer lower memory and storage in budget smartphones instead of raising handset prices.

“The contribution of memory in the bill of materials (BoM) of budget smartphones is much higher. Due to lower memory prices, brands have been offering up to 8GB RAM and 256GB storage under Rs 10,000. That will now get impacted after memory prices increase,” said Shilpi Jain senior research analyst at Counterpoint Research told The Economic Times.

This is also expected to affect the penetration of 5G handsets under Rs 10,000, which was projected to rise this year as Counterpoint now expects an estimated 1-2% of all shipments under Rs 10,000 to have 5G support, down from its November 2023 projection of 4%.