Australians shopping for a new smartphone or laptop this year face a confronting reality: the device will likely cost significantly more, may ship with less memory than its predecessor, and the market forces driving that outcome are expected to persist well into 2027. The culprit is not a supply chain shock in the traditional sense. It is, in a deeply ironic twist, the artificial intelligence boom itself.
Research firm IDC released updated forecasts this week that alarmed even veteran industry watchers. The firm is now projecting a 12.9% decline in global smartphone shipments for 2026 and an 11.3% fall in the PC market. Both figures are dramatically worse than IDC's own December estimates, with the smartphone forecast more than double the worst-case scenario it published just two months ago. According to IDC senior research director Nabila Popal, speaking during a roundtable discussion published Thursday,
"This is perhaps the biggest challenge the industry has faced since its inception."Popal described the situation not as a passing disruption but as a structural reset affecting market size, competitive dynamics, and pricing for years to come.
The mechanics of the crisis are straightforward, even if the scale is not. The world's three largest memory manufacturers, Samsung Electronics, SK Hynix, and Micron, have been systematically shifting production capacity away from the DRAM and NAND flash chips that power consumer devices and toward high-bandwidth memory (HBM) for AI data centre accelerators. As IDC explains, this is effectively a zero-sum game: every wafer allocated to an AI server component is one fewer wafer available for the LPDDR5X module inside a mid-range smartphone or the SSD inside a consumer laptop. With IDC's Jeff Janukowicz noting that the top four cloud providers are on track to spend $600 billion on AI infrastructure this year, roughly 70% more than last year, the pressure on consumer memory supply shows no sign of easing.
The cost consequences at the component level are already stark. During Dell's earnings call on Thursday, chief operating officer Jeff Clarke disclosed that DRAM prices have risen almost 5.5 times over the past six months, reaching $2.39 per gigabit. NAND prices have nearly quadrupled over the same period to $0.20 per gigabyte, with analysts projecting a further 20–50% increase in the second quarter. Dell itself reversed a price reduction it had implemented in October to chase market share, hiking PC prices on 6 January and, according to Clarke, stabilising its margins almost immediately. HP, reporting its own quarterly results this week, disclosed that memory now accounts for 35% of its PC materials cost, up from between 15 and 18% the previous quarter, and CFO Karen Parkhill flagged a further 100% sequential increase in memory prices expected next quarter. Gartner, publishing separately, warned that DRAM and NAND prices could rise a further 130% by year's end, according to reporting by The Register.
For consumers, the outcome is straightforward: pay more, get less. IDC expects average device prices to rise around 14%, while manufacturers at the lower end of the market are likely to ship products with reduced memory configurations. Budget Android handsets, which have been a key driver of global smartphone adoption, are among the most exposed. Lenovo's PC division head Luca Rossi told investors on 12 February that the company is modelling a mid-single-digit unit decline but expects revenue to hold as higher average selling prices offset the volume drop. The picture IDC paints suggests smaller and regional brands will struggle far more acutely than the large OEMs, which can leverage scale and long-term supply contracts to secure allocations.
There is a legitimate case that the AI investment driving this disruption will ultimately benefit consumers. Proponents argue that a smarter, more capable AI layer built into devices justifies higher prices, and that the infrastructure spending by hyperscalers is laying the foundations for productivity gains across the economy. Some analysts also point to a secondary market opportunity: as new device prices climb, demand for quality refurbished phones and laptops should strengthen, potentially extending the useful life of existing hardware and reducing electronic waste.
The harder question is whether the consumer electronics industry was given sufficient warning, and whether device makers and memory manufacturers could have managed the transition more responsibly. IDC's analysis makes clear this is not a cyclical mismatch but a strategic reallocation of production capacity. The major memory manufacturers made a calculated economic choice to serve higher-margin AI customers, which is rational from a shareholder perspective but has now imposed real costs on millions of ordinary consumers who simply want an affordable phone or a functional laptop for work or study. Those consumers had no voice in that decision.
The timing is particularly awkward for the PC industry. Microsoft's end-of-life for Windows 10 support was supposed to trigger a significant refresh cycle in 2025 and 2026, pushing consumers to upgrade to new hardware. Instead, that wave of demand is colliding with constrained supply and inflated prices, potentially suppressing the very upgrade cycle the industry was counting on. IDC now expects any meaningful market recovery to be pushed out to 2028.
What this means for Australian consumers in practical terms is a period of difficult choices. Holding on to a device for another year or two becomes more financially rational. Purchasing refurbished equipment from reputable sellers, once seen as a compromise, becomes a genuinely sensible option. And for those who do buy new, scrutinising the memory specifications carefully before purchase is more important than ever: a device shipped with the minimum viable RAM today may feel underpowered well before its time. The market will eventually rebalance, as memory capacity buildouts increase and, potentially, smaller Chinese suppliers bring additional supply online. But analysts are consistent in their view that this will take time, and that prices are unlikely to revert to 2025 levels within any near-term forecast horizon.