AI is reshaping the tech world. Now, it is squeezing the smartphone market.

A new report from International Data Corporation warns of a severe memory chip shortage. As a result, phone prices are hitting record highs.

According to IDC, the average smartphone price will jump 14% this year to $523. Meanwhile, ultra-cheap phones under $100 may disappear. In addition, global smartphone sales could fall 12.9% in 2026 to 1.12 billion units. That would mark the lowest level in over a decade.

So, what changed?

First, artificial intelligence exploded. Companies rushed to build data centers. Those centers need vast amounts of memory chips. Therefore, chipmakers shifted supply toward AI customers.

For years, memory chips brought steady but modest profits. However, AI changed the math. Suddenly, memory became critical.

Jensen Huang, CEO of Nvidia, recently stressed this point. He said AI systems require far more memory than before. As AI grows smarter, it also grows hungrier for storage.

Two key chip types drive this crisis. The first is DRAM, used in phones and laptops. The second is HBM, or high bandwidth memory. Data centers rely heavily on HBM. Because of this shift, supply for consumer devices has tightened.

Consequently, prices for both DRAM and HBM have nearly doubled in early 2026, according to Counterpoint Research. Manufacturers now face tough choices. They can cut memory in devices. Or they can focus on premium models.

At the same time, major chipmakers benefit. Shares of SK Hynix, Samsung Electronics, and Micron Technology have reached record highs. Their factories are nearly fully booked.

Taiwanese rivals are also ramping up. Companies like Nanya Technology Corporation and Winbond Electronics Corporation plan to expand output.

Still, smaller phone makers may struggle most. IDC expects Android vendors to feel deeper pain. In contrast, giants like Apple and Samsung Electronics can weather the storm.

Looking ahead, shortages may last into next year. Even Elon Musk of Tesla warned that limited memory supply could slow growth.

In short, AI’s boom has reshaped the chip market. As a result, consumers may soon pay the price.