Your Smartphone Will Cost More In 2026, According To Nothing Founder Carl Pei

For the first time in 15 years, consumer electronics manufacturers are facing direct competition for components from artificial intelligence (AI) data centers—an inflection point that could fundamentally reshape pricing across the industry. 

Earlier this week, Carl Pei, founder and CEO of Nothing, the London-based consumer technology unicorn, declared that 2026 will be a defining year for consumer electronics. Writing on LinkedIn, Pei said that this is the year that the “specs race” ends, noting that the industry is entering a period where its long-standing promise of better hardware at lower prices is no longer sustainable. 

For more than a decade, the smartphone sector has been built on a simple assumption: component costs would continue to fall. That dynamic, Pei argues, is now breaking down as smartphone makers increasingly compete with artificial intelligence (AI) data centers for critical memory technologies, including silicon wafers. As a result, consumers should no longer expect regular device upgrades to come without higher price tags. 

“For the first time, smartphones are competing directly with AI infrastructure, and memory prices are rising sharply as a result,” Pei wrote. “In some cases, memory costs have already increased by up to 3x, with further rises expected as unprecedented demand continues to swallow available supply. Memory is fast becoming one of the most expensive smartphone components and potentially the single largest cost driver in the bill of materials by year-end, with estimates suggesting that memory modules which cost less than US$20 a year ago could exceed $100 by year-end for top-tier models.”

“The result is a structural shift,” Pei continued. “This is a reversal of everything we’ve come to expect from this industry. When something that used to get cheaper every year suddenly becomes a lot more expensive, the economics of building a smartphone fundamentally change.”  

Pei is not alone in sounding the alarm. In November 2025, Reuters reported that Lu Weibing, President of Chinese consumer electronics giant Xiaomi, cautioned that rising memory chip costs would likely push smartphone prices higher in 2026. Speaking during an earnings conference call, Lu said that, “Overall, consumers are likely to see a sizeable rise in product retail prices. Some of the pressure may have to be addressed through price hikes, but price increases alone won’t be enough to digest it.” 

According to Reuters, the pressure stems in part from chipmakers, with companies like Samsung reducing output of components typically used in smartphones, as they ramp up production of high-bandwidth memory (HBM) destined for AI workloads.  

That assessment was echoed by Samsung itself. Speaking to Bloomberg on the sidelines of CES 2026 in Las Vegas, the company's President and Head of Global Marketing said, “There’s going to be issues around semiconductor supplies, and it’s going to affect everyone... Prices are going up even as we speak. Obviously, we don’t want to convey that burden to the consumers, but we’re going to be at a point where we have to actually consider repricing our products.” 

Carl Pei, founder and CEO, Nothing.

Evidence of a prolonged squeeze emerged in December 2025, when the International Data Corporation (IDC) published a report titled Global Memory Shortage Crisis: Market Analysis and the Potential Impact on the Smartphone and PC Markets in 2026. The report warned that the semiconductor industry is grappling with an “unprecedented memory chip shortage with knock-on effects for the device manufacturers and end users” that could extend well into 2027.  

IDC identified smartphones and personal computers as the two consumer markets most likely to feel the impact. Crucially, the firm stressed that this is not a typical cyclical shortage, but one with long-term structural implications. According to the report, “The voracious demand for HBM by hyperscalers, such as Microsoft, Google, Meta, and Amazon, has forced the three biggest memory manufacturers (Samsung Electronics, SK Hynix, and Micron Technology) to pivot their limited cleanroom space and capital expenditure towards higher margin enterprise-grade components.” 

“This is a zero-sum game: every wafer allocated to an HBM stack for an Nvidia GPU is a wafer denied to the LPDDR5X module of a mid-range smartphone or the SSD of a consumer laptop,” the report added. 

IDC notes that low-end Android manufacturers, already operating on thin margins, are likely to be hit hardest, while premium brands may be better positioned to absorb short-term shocks. In the PC market, the divide could be even starker: larger vendors are expected to weather the disruption, while smaller players may struggle to compete in an era where access to silicon is no longer guaranteed.  

Indeed, this confirms Pei’s prediction on LinkedIn. “Brands now face a simple choice: raise prices, by 30 percent or more in some cases, or downgrade specs,” he said. “The ‘more specs for less money’ model that many value brands were built on is no longer sustainable in 2026. As a result, some markets, particularly entry and mid-tier segments, are likely to shrink by 20 percent or more, and brands that have historically dominated these segments will struggle.” 

For consumers, the implications are clear. Future device purchases are likely to deliver less value for money, as the familiar cycle of falling prices paired with incremental feature upgrades becomes increasingly difficult to sustain.  

Pictured in the lead image is Carl Pei, founder and CEO of Nothing. All images courtesy Nothing.