No Longer Able to Sell Cheaply... Rapid Growth of Chinese Phones Chasing Samsung Comes to an Abrupt Halt

Soaring Memory Component Prices Drive Up Costs
Price-Competitive Chinese Smartphones Struggle to Pass Costs to Consumers

Chinese smartphone brands, which have long relied on cost-effectiveness to closely compete with Apple and Samsung Electronics, are expected to see a sharp decline in shipments this year. This downturn is driven by the surge in memory prices fueled by the artificial intelligence (AI) boom.

According to reports from Nikkei Asia and other foreign media on July 8 (local time), major Chinese smartphone brands such as Xiaomi have recently notified component suppliers that they will lower this year's shipment targets by up to 30%.

Smartphones displayed at the Xiaomi store in Beijing. Xiaomi

For Xiaomi, the shipment target for this year has been cut to 95 million units, down about 44% from last year's 170 million units. The reasons are component shortages and rising costs. Other leading Chinese brands like Oppo and Vivo have also lowered their expected sales to below 90 million units.

Honor, the smartphone brand of Huawei that set a record by shipping 71 million units last year, is reportedly not expecting to continue its growth this year. In addition, in January last year, Chinese smartphone maker Meizu canceled the scheduled launch of its slim smartphone 'Meizu 22 Air' that was planned for early in the year.

An executive from the component supply chain explained to the media, "Currently, the average shipment decrease rate among our Chinese smartphone clients has fallen to a baseline of around 15%," and added, "Chinese brands, which have a high proportion of cost-effective products, cannot pass on the increased component prices to consumers."

The main reason for the slowdown in the growth of Chinese smartphones is the sharp rise in memory prices. In particular, DRAM suppliers have shifted their production toward high-bandwidth memory (HBM) for AI and server DRAM, which in turn has reduced the supply of smartphone DRAM and NAND flash.

To make matters worse, even low-power DRAM (LPDDR), which is designed for mobile products, is being absorbed by the AI sector. Nvidia's next-generation AI chip 'Vera' CPU incorporates a large number of LPDDR chips.

Market research firm Counterpoint Research forecasts that global smartphone shipments will decrease by a total of 14% this year.

This content was produced with the assistance of AI translation services.