Xiaomi Warns 2026 Phone Costs May Spike as Chip Supply Tightens

TLDRs;

• Xiaomi expects smartphone prices to rise in 2026 as global memory chip shortages intensify and component costs surge.
• AI and data-center demand are diverting memory supply away from mobile chips, worsening shortages and lifting contract prices.
• NAND and DRAM output cuts by Samsung, SK Hynix, Micron, and Kioxia are tightening supply even further.
• Used and refurbished smartphone markets are growing rapidly as consumers delay upgrades amid rising device prices

Xiaomi is cautioning consumers and investors to prepare for more expensive smartphones in 2026, as tightening global memory chip supplies begin reshaping pricing outlooks across the mobile industry.

The warning follows a sharp shift in market dynamics driven by surging AI-related demand and cuts in production of lower-end memory components.

Speaking at a recent industry event, Xiaomi president Lu Weibing confirmed that the company has already secured supply agreements for next year but emphasized that the rising cost of memory components will inevitably filter into retail prices. Lu described the current supply crunch as potentially “longer and more severe” than previous memory shortage cycles, noting that the company must now factor elevated component pricing into its broader product strategy.

The alert comes just weeks after Xiaomi raised the price of its flagship smartphone, citing rising memory costs. It also aligns with comments from Semiconductor Manufacturing International Corp. (SMIC), which recently warned that memory chip constraints could cap production of both automobiles and consumer electronics in 2026.

AI Boom Strains Memory Supply

A large share of today’s shortage traces back to an industry-wide shift in manufacturing priorities. High-end memory used in data centers and AI accelerators is consuming staggering capacity from global suppliers.

Companies like SK Hynix and Samsung, both major suppliers of DRAM and NAND flash, have increasingly reallocated resources toward producing High Bandwidth Memory (HBM), a crucial component in training advanced AI models.

Nvidia’s soaring GPU demand is a major factor. Analysts estimate that the memory used to feed Nvidia’s latest accelerators is equivalent to what would normally power around 20 million smartphones, roughly 10% of China’s annual smartphone shipments. This redirection of supply is leaving mobile-grade memory chips in short supply.

Suppliers Cut NAND Output

Further compounding the issue, major memory manufacturers trimmed output in the second half of 2025. SK Hynix slashed NAND production by roughly 10%, while Kioxia and Micron made similar reductions.

Industry projections suggest Samsung may raise 2026 contract memory prices by as much as 20%–30%, a move that would ripple across the entire smartphone ecosystem.

With DRAM contract prices expected to jump over 75% year-over-year in the fourth quarter of 2025, smartphone makers are bracing for substantial increases in their bills of materials (BOM). Analysts expect mobile BOM costs to rise between 8%–10% this year and 5%–7% in 2026, assuming shortages persist.

Smartphone Costs Set to Rise

For manufacturers like Xiaomi, which compete aggressively on price, rising memory costs present an unavoidable challenge.

While premium models typically absorb cost increases more easily, mid-range and entry-level devices, Xiaomi’s volume drivers, may see significant price adjustments next year.

If the supply squeeze deepens, Lu indicated that the company could face narrower margins or be forced to pass costs directly to consumers.

Used Device Market Expands Fast

The global smartphone market is already reacting. As new device prices climb, demand for used and refurbished phones is accelerating.

IDC estimates that refurbished smartphone shipments will grow 3.2% in 2025, with further expansion of 5.8% expected in 2026. The used smartphone market, valued at $99.9 billion by 2026, is on track to reach more than 400 million units shipped globally.

Trade-in programs, certified pre-owned platforms, and third-party refurbishment networks are becoming increasingly influential in shaping consumer upgrade cycles. As buyers hold onto devices longer, resale markets are gaining pricing power and offering carriers, OEMs, and logistics companies new revenue opportunities.

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