The global semiconductor shortage, especially of memory chips, is driving up smartphone prices both in Pakistan and globally. The increasing use of AI, shifting industry priorities, and constrained production capacity have raised component costs, forcing manufacturers to pass these costs onto consumers.
Why Smartphone Prices Are Rising
1. Memory Chip Costs Surge
Manufacturers say the price of memory chips, essential components in smartphones, has increased significantly. According to Muzaffar Paracha, Senior Vice-Chairman of the Pakistan Mobile Phone Manufacturers Association (PMPMA), memory chips have become “costlier, between 20 to 30 per cent,” and all of these are imported.
This rise in memory costs translates directly to higher production costs for devices, which phone makers have little choice but to reflect in retail prices.
2. AI Features Driving Demand for Higher Memory
Smartphones today increasingly include AI-driven features. More apps come preloaded with AI capabilities, which require larger amounts of RAM (temporary data storage) and ROM (permanent on-board storage). As Zeeshan Miannoor, vice chairman of PMPMA, explains, this has pushed demand toward higher-capacity chips, further intensifying shortages.
3. Shortage of Lower-Capacity Chips
Traditional lower-capacity memory configurations — such as 4GB RAM and 64GB ROM — are becoming scarcer. Taiwanese memory-chip makers have shifted production toward higher-capacity options like 6GB/256GB chips to meet global 5G and performance demand. This shift has led to reduced supply and higher prices for the chips still needed in budget smartphones, as noted by Naveed Gaba, CEO of VGOTel.
Global Semiconductor Dynamics
The trend observed in Pakistan reflects a wider global phenomenon. The ongoing surge in demand for memory chips, particularly from AI-focused industries and data centers, has tightened supply and driven global prices higher. According to research firms such as Counterpoint, the average selling price of smartphones worldwide could rise around 6.9% in 2026 as a result of memory shortages and higher component costs.
Entry-level and budget devices are especially vulnerable, with manufacturing costs rising by 20–30% since early 2025, a trend expected to continue through 2026.
Impact on Local Market and Consumers
In Pakistan, brands like Infinix and Tecno have already raised prices in response to chip cost inflation, while others, such as Vivo, Realme, and Oppo, are expected to follow suit.
The impact is broad:
Higher Retail Prices: Consumers are expected to pay more for smartphones, particularly models with higher memory specifications.
Shipment Declines Globally: Research firms project a slight drop in global smartphone shipments as higher prices dampen demand.
Budget Phones Hit Hardest: Devices priced under $200 are most affected as they have the smallest margins and are most sensitive to component cost increases.
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Industry and Government Responses
Industry representatives have urged policymakers to support measures that could ease price pressure. Amir Allawala, senior member of PMPMA, highlighted the need for more local component manufacturing and consumer financing options, such as installment plans, to make smartphones more accessible despite rising prices.
There is also ongoing discussion about improving the localization of electronics production and reducing dependency on imports, a move that could help stabilize prices in the long run.
Expert Quotations
“The memory chips have become costlier, between 20 and 30 per cent, and all of it is imported.” Muzaffar Paracha, Senior Vice-Chairman, PMPMA.
“Now almost all preloaded apps on phones have AI features, which has led to increased memory requirements for both RAM and ROM.” Zeeshan Miannoor, Vice Chairman, PMPMA.
“Taiwanese memory-chip makers have almost stopped producing 4GB/64GB chips, and prices of 4GB/128GB IC chips have increased significantly.” Naveed Gaba, CEO, VGOTel.
Conclusion
The ongoing global chip shortage, fueled by rising memory costs and accelerating demand from AI-centric industries, is reshaping the smartphone market. Consumers face higher prices and limited availability, particularly in budget segments, while manufacturers and policymakers seek strategies to adapt to the evolving challenges of the supply chain.
