Squeezing SoC vendors globally, rising memory costs are reshaping smartphone economics as AI, gaming, and imaging push DRAM and storage to 20% of flagship bill-of-materials costs.
Memory and storage are rapidly becoming central to the smartphone industry’s cost structure and performance, fundamentally reshaping the system-on-chip (SoC) market. According to a report by Counterpoint Research, in recent years, memory has accounted for an increasingly significant share of a flagship device’s bill of materials (BoM).
The report cited 2020, when memory accounted for roughly 8% of the BoM in an iPhone 12 Pro Max, which included 6GB of DRAM and 128GB of NAND storage. By 2025, this share had risen to approximately 10% in the iPhone 17 Pro Max, which is equipped with 12GB of DRAM and 256GB of NAND.
Current Android flagships, with configurations of 12GB-16GB LPDDR5X RAM and 512GB-1TB UFS 4.0 storage, now account for 20% or more of total BoM costs, largely due to rising memory prices.
This shift in cost dynamics is driven by the increasing demand for on-device AI capabilities, advanced gaming, and more complex imaging functions. The expansion of data centres has also created supply constraints, as memory suppliers focus on providing high-bandwidth memory (HBM) and DDR5 for servers, leaving less capacity for legacy DRAM types, such as LPDDR4.
Consequently, memory prices have surged, further impacting the cost structure of smartphones.
In 2026, global smartphone shipments are expected to fall by 6.1% year-on-year, with SoC shipments dropping 7%. Chinese OEMs are predicted to be hit hardest, while Apple and Samsung benefit from their integrated supply chains and a shift toward premium products. Google is anticipated to experience the strongest growth, aided by AI differentiation.
Meanwhile, rising memory and storage requirements, especially with the adoption of LPDDR5X/LPDDR6 and UFS 4.x, are driving up silicon costs, creating barriers for entry-level and mid-range devices.
According to Soumen Mandal, a Senior Analyst at Counterpoint, the smartphone market is unlikely to recover until the second half of 2027 or early 2028. During this period, OEMs will need to make trade-offs between cost, performance, and innovation.
However, the growing demand for AI-driven features and the rise of in-house SoC strategies will continue to reshape the competitive landscape, putting pressure on traditional chipset suppliers.
