Memory shortages are pushing prices sharply higher, forcing a reshuffle across the consumer electronics market. Chinese authorities have intervened for a second time, convening domestic memory leaders CXMT and YMTC to provide "strategic support" aimed at stabilizing prices and containing supply chain costs for local brands. Yet with a wide supply-demand gap in DRAM and NAND flash, near-term price stabilization remains unlikely.
Some vendors have urged policymakers to redirect subsidies from consumers to device brands. The objective is to ease cost pressure from broad-based inflation while avoiding stimulus that could accelerate upgrades to Apple devices. Market estimates indicate shipments by Chinese smartphone brands may continue to decline, with some vendors facing sales drops of 20–25%.
Memory price surge chills demand
Memory prices have risen continuously since 2025, triggering a sharp contraction in channel demand. Leading module makers that once recorded monthly sales in the millions of units are now seeing volumes fall to 10–20% of prior peaks.
Retail demand in January and February dropped nearly 50%, pointing to a rapid freeze in distribution channels. Despite weaker shipments, vendors holding inventory have benefited from surging prices. Supported by low-cost stock accumulated earlier, several China-based module makers have reported multiple-fold increases in revenue and profit.
Smartphones bear the brunt of soaring costs
NAND flash prices have surged up to tenfold within six months, placing heavy cost pressure on device makers. Smartphones priced below CNY1,500 (US$218) are expected to be most affected.
Estimates suggest LPDDR and NAND now account for 60–70% of bill-of-materials costs in entry- and mid-range devices. With limited ability to pass through costs, margins have been largely eroded. Brands that previously relied on aggressive pricing strategies are now facing mounting financial strain.
Oppo and Vivo have announced price adjustments for selected models starting in March. Market estimates suggest increases of CNY500–1,000.
Whether consumers will absorb these hikes remains uncertain. Earlier projections pointed to a 10% decline in smartphone sales in 2026, but continued increases in memory and raw material costs, combined with inflationary pressure linked to geopolitical instability, could deepen the contraction to 20–25%.
Beijing steps in, but supply remains tight
Chinese authorities have recently convened meetings involving the smartphone supply chain and executives from CXMT and YMTC to discuss market stabilization. Domestic memory leaders are expected to take on supply assurance roles, prioritizing support for local smartphone brands while attempting to limit excessive price increases.
CXMT is not expected to resume expansion of DDR4 or LPDDR4 capacity, with related output largely allocated to GigaDevice. Instead, the company is focused on improving yields for higher-end DDR5 and LPDDR5 products ahead of its planned IPO. With DRAM supply still tight, pricing is expected to remain market-driven.
Recent adjustments to the US Department of Defense's 1260H list have removed CXMT and YMTC. Market speculation suggests that Apple may incorporate YMTC into its supply chain, underscoring tight conditions in the NAND flash market. Reports indicate that iPhones sold in China could increasingly adopt YMTC NAND. Initial volumes may be limited, but the move could reduce reliance on Korean suppliers while signaling alignment with local supply chains.
Apple pulls ahead as rivals struggle
Market data show iPhone sales in China rose 23% year-on-year in the first nine weeks of 2026, compared with a 4% decline in the broader smartphone market. While Chinese brands are raising prices under cost pressure, Apple's pricing power and services-driven ecosystem allow it to absorb higher input costs and maintain stable pricing. This dynamic is likely to support further market share gains for Apple in 2026, adding pressure on domestic competitors already facing tightening margins.
The current cycle highlights a structural imbalance across China's smartphone supply chain. Memory pricing remains supplier-driven, while downstream brands have limited pricing power. Policy coordination may offer short-term relief, but without a shift in supply conditions, cost pressure is likely to persist, reshaping competitive dynamics across the market.
Article translated by Levi Li and edited by Jerry Chen
