Nothing founder and CEO Carl Pei has warned that smartphone prices are likely to rise sharply as booming investment in artificial intelligence infrastructure pushes global memory and storage costs to record highs, fundamentally altering the economics of the handset industry.
In a post on X dated January 14, Pei said the long-held belief that smartphone components would consistently become cheaper has finally collapsed. He attributed this shift to an unprecedented surge in memory costs driven by the rapid expansion of AI data centres. According to him, hyperscale technology companies are locking in chip capacity years in advance to support AI workloads, forcing smartphone manufacturers to compete directly with AI infrastructure for the same memory components.
Pei said memory has quickly become one of the most expensive parts of a smartphone and could soon emerge as the single biggest cost driver in the bill of materials. In some cases, memory prices have already risen by as much as three times, with further increases expected as demand continues to outstrip supply. He noted that memory modules which cost under $20 a year ago could exceed $100 by the end of 2026 in premium smartphones.
This surge, Pei said, represents a structural reset for the entire smartphone market. With rising component costs, brands face a stark choice between significantly raising prices—by as much as 30% in some cases—or downgrading specifications. He warned that the long-standing model of offering more specifications at lower prices is no longer sustainable and that entry-level and mid-range segments could shrink by 20% or more as affordability comes under pressure.
Pei acknowledged that Nothing will not be immune to these changes. The company plans to upgrade some upcoming devices with faster UFS 3.1 storage, which will add further cost pressures. However, he argued that 2026 will mark the end of the decade-long “specs race” that has dominated the industry, with user experience, design, and software optimisation emerging as the key differentiators.
“The era of cheap silicon is over,” Pei said, adding that the focus must now shift toward intentional design and how devices perform in everyday use rather than headline specifications.
The comments come as Nothing continues to expand its footprint in India, one of its fastest-growing markets. The company recently announced plans to open its first flagship experience store in the country, while its sub-brand CMF is establishing its global headquarters in India. Nothing currently exports multiple India-made devices globally, including models from the Phone (3), Phone (2a), and Phone (3a) series.
According to Counterpoint Research, Nothing accounts for less than 1% of global smartphone volumes, but more than 70% of its sales come from India. The company has also emerged as one of the fastest-growing brands outside the top five globally, recording 31% year-on-year growth in 2025.
Despite rising costs, Pei reiterated that Nothing will continue to prioritise design, usability, and overall experience over chasing higher specifications, positioning itself for a market where value is increasingly defined by how a device feels and functions rather than raw hardware numbers.
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