Key facts
- Smaller phone and laptop makers are redesigning products and passing on costs due to a memory shortage expected to last through 2027.
- Availability, not price, is the binding constraint for these companies.
- Memory maker SK Hynix anticipates 2027 will be the industry's worst year for supply, with demand outstripping capacity beyond 2030.
- Smartphone shipments are forecast to fall 13.9% this year to 1.08 billion units, the steepest annual decline on record.
- Memory can account for almost 60% of the bill of materials on handsets priced around $400.
Smaller phone and laptop makers are implementing significant changes to their product designs and supply chain strategies as a persistent memory shortage is expected to continue until at least 2027. Executives from three companies highlighted that securing component availability, rather than cost, is the primary challenge. This scarcity is particularly impacting the lower end of the device market, making entry-level phones uneconomical to produce.
Raymond van Eck, CEO of Fairphone, stated that without allocation, companies are effectively out of the market. SK Hynix's CEO projected in July that 2027 would represent the worst year for supply in the industry's history, with demand projected to exceed capacity beyond 2030. Counterpoint Research's June forecast indicated a record 13.9% decline in smartphone shipments for the year, totaling 1.08 billion units, largely due to rising memory costs.
TrendForce anticipates a 13-18% increase in conventional volatile memory (DRAM) contract prices this quarter, a significant slowdown from the 93-98% surge seen in the first quarter. Jolla, a Finnish handset maker, reported that its combined storage and DRAM package costs have stabilized since March, contrary to earlier forecasts of a doubling by autumn. Sami Pienimäki, Jolla's CEO, expects supply to normalize no earlier than 2028.
The extent of the supply-demand mismatch became apparent late last year, according to Nirav Patel, CEO of Framework, a US-based repairable-laptop maker. This realization led to a scramble for inventory, exacerbating the shortage. Framework, unable to build large stockpiles, places non-cancellable orders far in advance without knowing the final price, timing, or volume.
In response to the scarcity, Jolla has designed motherboards with two variants, allowing for the substitution of combined packages with discrete chips. Framework's laptops were designed with modular memory from the outset, enabling customers to reuse memory from older machines. Jolla also implements rigorous stress-testing on every batch of chips received to ensure they are new and not resold refurbished parts. Pienimäki noted that sellers often resort to reselling refurbished parts when prices spike.
Memory costs can constitute nearly 60% of the bill of materials for handsets priced around $400, according to van Eck. Companies are adapting their pricing strategies differently: Framework reprices its products quickly as costs are incurred, Jolla offers a paid memory upgrade option, and Fairphone has maintained its current pricing without increases.