Soaring Memory Prices Could Kill Budget PCs and Smartphones as AI Demand Drives Costs Up 130%

Memory price hikes will kill off budget PCs and smartphones

Analyst warns soaring DRAM and NAND costs could push entry-level devices out of reach Ballooning memory prices are forecast to kill off entry-level PCs, leading to a decline in global shipments this year - and a similar effect is going to hit smartphones. Analyst biz Gartner is projecting a drop in PC shipments of more than 10 percent during 2026, and a decline of around 8 percent for smartphones, all due to the AI-driven memory shortage. Some types of memory have doubled or quadrupled in price since last year, and Gartner believes DRAM and NAND flash used in PCs and phones is set for a further 130 percent rise by the end of 2026. The upshot of this is that the budget PC will disappear, simply because vendors won't be able to build them at a price that will satisfy cost-conscious buyers, according to Gartner research director Ranjit Atwal. "Because the price of memory is increasing so much, vendors lose the ability to provide entry-level PCs - those below about $500," he told The Register. PC makers could just raise the price of their cheap and cheerful boxes to above that level to compensate for the memory hike, however, price-sensitive buyers simply won't bite, he added. Another factor expected to add to declining fortunes of the PC industry this year is AI devices - systems equipped with special hardware for accelerating AI tasks, typically via a neural processing unit (NPU) embedded in the CPU. These systems were predicted to take the market by storm, but they require more memory to support AI processing and vendors like to mark them up to a premium price. "Historically, downgrading specifications was the way to go when prices were being squeezed, but that's difficult here," Atwal said. For example, Microsoft requires a minimum of 16 GB for Copilot+ PCs, its own AI platform spec, and Gartner recommends at least 32 GB for new enterprise PCs. "The thinking was that the average price [of AI PCs] would fall this year, and lead to more adoption," said Atwal, "but that's not happening." The lack of killer applications isn't helping either. In any case, buyers are still looking more at the traditional attributes of price, battery life, and performance rather than AI capabilities when sourcing a new PC, as we reported earlier this year. HP revealed in its latest earnings on Tuesday that 35 percent of the PCs it now sells are AI PCs, but these models were supposed to be dominating the market by this time, and expected to comprise virtually every system you could purchase by next year. The memory price hike is complicating this. HP disclosed that DRAM now accounts for 35 percent of the PC build cost, up from between 15 and 18 percent last quarter, and it expects this proportion to increase during the rest of the calendar year. For this reason, AI PCs are likely to remain in the premium bracket, and Atwal predicts they won't make up more than 50 percent of the market until 2028. As a result, systems without NPUs will stick around for longer. On the back of rising costs, Gartner expects more corporate and home buyers to sweat their assets for longer and hold off refreshing their PCs. As a result, the lifetime of systems is set to increase by 15 percent within businesses and 20 percent for consumers. However, anyone considering a refresh should buy now, as prices are only going to inflate and likely stay up until at least the end of next year. With smartphones, vendors have more margin to play with, and so can be more flexible, according to Atwal, but he still sees entry-level models going the same way as the budget PC. "The increase in memory prices means entry phones will become more expensive, but premium devices are likely to go up less," he said. As a result, the price advantage enjoyed by budget smartphones will shrink, leading some buyers to move upmarket while others will simply hold off purchasing. Similar predictions were made in a report last month, which said low-cost phone makers will be hardest hit by the memory crisis, as memory and storage costs make up a higher share of their bill of materials. "The end result is that you are losing choice in the marketplace," Atwal said. "What we have here is a fairly unique situation," he explained. "Usually when memory prices shoot up, it is because of production issues constraining supply. Here, it is demand-side pressure from hyperscalers pushing up memory costs for PCs and smartphones." Unlike earlier boom-bust cycles in the memory industry, in which prices rise and fall in line with inventories, this shortage is likely to be long-lasting, and could extend through to the end of 2027, Atwal warned. ®

Say goodbye to budget PCs and smartphones - memory is too expensive now - General Chat

Ballooning memory prices are forecast to kill off entry-level PCs, leading to a decline in global shipments this year - and a similar effect is going to hit smartphones. Analyst biz Gartner is projecting a drop in PC shipments of more than 10 percent during 2026, and a decline of around 8 percent for smartphones, all due to the AI-driven memory shortage. A hard disk drive platter with 1s and 0s projected onto it Hard drives already sold out for this year - AI to blame READ MORE Some types of memory have doubled or quadrupled in price since last year, and Gartner believes DRAM and NAND flash used in PCs and phones is set for a further 130 percent rise by the end of 2026. The upshot of this is that the budget PC will disappear, simply because vendors won't be able to build them at a price that will satisfy cost-conscious buyers, according to Gartner research director Ranjit Atwal. "Because the price of memory is increasing so much, vendors lose the ability to provide entry-level PCs - those below about $500," he told The Register. The used market will also sky rocket in price of course.