Samsung phone prices don't seem to be coming back down anytime soon. Mobile devices have become significantly more expensive over the past year. However, recent statements show that this trend may continue. Because despite record-high memory chip prices, there is no slowdown in demand.
The main reason for the price increase is the jump in demand for memory chips. This demand is driven especially by hyperscale companies in the field of artificial intelligence, that is, large companies operating huge data centers. Moreover, these companies are willing to pay the price that memory manufacturers want.
This powerful group of buyers on the demand side is buying chips regardless of price. That's why memory chip prices have reached record levels. Therefore, phone manufacturers are forced to purchase memory chips at a higher price. Memory chips are used in phones as well as in data centers. Therefore, the contraction in chip supply is directly reflected in device costs.
Samsung predicts that the memory chip crisis will continue for the foreseeable future. For this reason, the pressure on Samsung phone prices is not expected to ease in the short term. Moreover, even though prices are at record levels, chip demand does not decrease. In other words, the tightness in the chip market does not seem to ease for now.
Samsung Electronics announced its quarterly financial results earlier this week. The company's quarterly profit increased nearly ninefold. In particular, the rising prices of memory chips enabled this jump. The numbers show that the crisis brought huge gains to the memory side of the company. On the other hand, device manufacturer Samsung also has to purchase the same chips at a higher cost.
The company announced in a statement that it expects artificial intelligence infrastructure spending to reach a “historic level.” Infrastructure spending, that is, capital investment to establish artificial intelligence systems, also includes chip purchases. Additionally, chip demand is expected to far exceed the industry's supply by 2026. Therefore, there is no clear sign of demand easing in the short term.
The profit table also reveals how chip manufacturers benefited from this period. However, the same period is expensive for consumers purchasing phones and other devices.
Simply put, artificial intelligence companies will continue to buy chips at the prices set by Samsung, SK Hynix and Micron. Therefore, memory chips allocated to consumer products are decreasing. Moreover, the remaining chips are supplied more expensively for device manufacturers such as Samsung and Apple.
The logic of the chain is actually simple. First, artificial intelligence companies buy the chips. Then, device manufacturers step in for the remaining chips. Finally, the increasing price is reflected in the price tags of the products.
These manufacturers do not have much choice. Therefore, they are expected to pass on the increased cost to the end user. This also applies to Samsung phone prices. In fact, prices across most major product lines are up several hundred dollars this year.
