Chip crunch hits laptops, budget smartphones

Prices of budget smartphones and laptops in India have risen by almost 10% and a further increase may be on the anvil next year.

- Shouvik Das

The reason: memory chips, a crucial component of these devices, have become 50% more expensive since January, and an additional 50% price hike could be on the cards—making the most-sold phones and laptops more than 10% more expensive over the next year.

Memory chips have become costlier because manufacturers such as Micron Technology in the US and South Korea’s Samsung and SK Hynix have started focusing most of their manufacturing lines on making high-bandwidth memory chips—used in graphic processing units that Nvidia sells for artificial intelligence data centres. This has created a supply shortage of legacy, general-purpose chips, which are used in smartphones and laptops alike.

A typical memory chip used in smartphones and laptops accounts for 10-15% of the cost of production—an average of $30-60 in budget phones and laptops. Compounding this issue are the margins, which typically are less than 10% in the budget categories of smartphones under ₹20,000 and laptops below ₹50,000.