The Rising Costs and Shrinking Capacities of Tech Devices
The technology industry is facing a significant challenge as the next wave of smartphones and PCs will have less memory and fewer capabilities, yet are likely to cost consumers 14 percent more. This situation is driven by the increasing demands of AI, which is consuming all available memory supplies. According to researchers at IDC, this issue has led to a deterioration in the market outlook since December.
IDC’s latest projections show a decline in the PC market of 11.3 percent in 2026, which is about 26 percent worse than their previous estimate in December. Similarly, the smartphone market is expected to see a drop of 12.9 percent, which is more than double the 5.2 percent drop they had predicted as a worst-case scenario just two months ago.
“This is perhaps the biggest challenge the industry has faced since its inception,” said Nabilia Popal, IDC’s senior research director global consumer devices, during a roundtable video discussion. “This is not just a temporary situation. This is going to result in a structural reset of the entire industry, in terms of size, in terms of competitive landscape, of the product mix and also on the price.”
Industry Response to the Memory Crisis
To address the rising costs and shortages, IDC expects consumers to hold onto their devices longer or turn to used and refurbished units. Device manufacturers are also likely to downgrade memory on their least expensive devices, optimize features around using less memory, or in some cases turn to Chinese suppliers that they’ve avoided due to geopolitical or technical concerns.
Jeff Janukowicz, research vice president at IDC, noted that any meaningful impact is expected to take some time. “So ultimately, from our perspective we continue to see a challenging environment in 2026. That’s likely to push into 2027.”
Gartner is also sounding the alarm, stating that some types of memory have doubled or quadrupled in price since last year. Gartner believes DRAM and NAND flash used in PCs and phones are set for a further 130 percent rise by the end of 2026.
Impact on Major Tech Companies
In the PC market, IDC expects the shortages to begin in the second quarter as smaller vendors struggle to obtain supplies, leading to a dramatic drop in unit volumes. During its earnings call, Dell’s chief operating officer and vice chairman Jeff Clarke mentioned that DRAM prices over the last six months are up nearly 5.5x, at $2.39 a gigabit. Meanwhile, the cost of NAND is $0.20 a gigabyte, up nearly 4x over the last six months.
Dell adjusted its pricing strategy, reducing the price of PCs in October to win market share, then increasing the cost of PCs in January to adjust for higher memory prices. The company had tens of thousands of deals in the pipeline with prices adjusted upwards, which immediately took pressure off Dell’s margins.
HP revealed that memory now accounts for 35 percent of the cost of materials it needs to build a PC, up from between 15 and 18 percent last quarter. The company expects to see memory prices increase 100 percent sequentially into the next quarter, according to HP CFO Karen Parkhill.
Lenovo’s PC boss Luca Rossi mentioned that they will raise their average selling price for PCs in 2026, as the number of available PCs will likely drop. Rossi told investors that while the unit decline may be mid-single digits, the higher ASP and favorable product mix will offset this.
The Future of Memory Prices
Janukowicz noted that the top four cloud service providers are projected to spend $600 billion this year on AI build outs that require DRAM and NAND—some 70 percent more than last year. This indicates that the cost of memory will likely not stabilize until 2027.
“This is not necessarily a short disruption and it reflects a structurally tight environment. This is a message that we’ve heard consistently really since the beginning of 2026.”
