Tech Talk: Here's why your next phone will cost more, and why budget phones may be hit the hardest

Welcome to Tech Talk, a weekly column about the things we use and how they work. We try to keep it simple here so everyone can understand how and why the gadget in your hand does what it does.

Things may become a little technical at times, as that's the nature of technology — it can be complex and intricate. Together we can break it all down and make it accessible, though!

You might not care how any of this stuff happens, and that's OK, too. Your tech gadgets are personal and should be fun. You never know though, you might just learn something ...

Data centers are memory hogs

All computers need memory. I'm talking about RAM (Random Access Memory), which is used to store data for processes running right now, not for storage like a hard drive. Some need more memory than others.

The data centers that power AI (including the tiny one that lives inside your phone) are especially hungry for memory. They need it to store parts of a solution in progress while the rest is being calculated, as well as to prefetch data from storage that a piece of AI software might need fast access to. That's why the best Android phones have so much RAM inside them now. They need it.

Turns out AI data centers are demanding so much memory that some manufacturers are even leaving the consumer business to focus on the giant orders that can make a lot more profit. Google might only need 12GB of memory to make a phone, but it needs hundreds of megabytes for every data center server. It makes sense for companies to try to supply bigger clients.

The problem is that this is not the same type or configuration of RAM used in things like a phone or even a consumer PC. Semiconductor suppliers have to focus on what's profitable.

Supply and demand

Everyone still wants or needs a smartphone. That's never going to change unless technology advances to a point where something else can tackle everything your smartphone can do.

Let's use some easy numbers for an example here. There are 100 people who want to buy a new phone. There are 500 data center computers that need memory. A semiconductor manufacturer can only make 500 products in total.

Existing contracts say it has to supply a phone maker with 85 modules. It's going to fulfill that contract, then focus on the data center orders because they are more profitable. It's also going to raise prices because the entire company has to work harder to fulfill every order, so component prices are going to increase.

Your favorite phone maker can only make 85 of the phones it wants to sell; those cost more to manufacture, and since fewer are made than customers want to buy, demand will be high.

In the end, you will pay more.

A substantial amount more, according to companies like Counterpoint Research, which says that memory prices will climb another 30% in the last part of 2025 and an additional 20% early next year. If the memory inside your next phone costs 50% more, that's going to lead to a noticeable price increase. You know the consumer is always the one who pays price increases in the end.

Some, like IDC, claim this will affect sales, and demand is expected to decrease in 2026. That makes sense; fewer people will buy a new phone if it's too expensive and their current phone still works.

Unfortunately, cheaper budget models will be hit the hardest because there just isn;t a lot of pre-built profit margin in them. According to IDC, "the average selling price for smartphones is expected to climb to $465 in 2026, compared to $457 in 2025, putting the smartphone market at a record high value of $578.9 billion."

Cheap Android phones are consumer staples. Enthusiasts are fine with paying upwards of $1,000 or more for the latest and greatest, but for most people, that's overkill. A good, cheap Android phone will do everything you need a smartphone to do, it just lacks a few bells and whistles. Starting at the tail end of this year, those phones won't be as cheap because they cost more to make. For there to be any profit in manufacturing an inexpensive phone, prices have to rise to account for it.

I think this will only get worse

The thirst for AI is unlikely to diminish in 2026. We're also unlikely to see any new companies with the capacity to manufacture millions of DRAM modules spring up in just a year.

I'm betting prices will keep climbing as demand grows. A small decrease in smartphone shipments won't make much of a difference. Companies like Google, Microsoft, and Nvidia are going to keep spending trillions on new data centers until they have a reason to stop, which isn't likely to happen in just a year.

And we can't lay the blame on any one thing. It's hard to build data servers and equally hard to fabricate memory for them all. It's easy to hate AI for this, but there is demand for the useful things it can do now and in the foreseeable future. Things like medical research or safer aircraft, not just for fixing your blurry pictures.

That doesn't change any of it, though, and we should expect phone prices to climb until they reach a point where we stop buying them. Are you willing to give up using a smartphone because it costs $100 more than it did when you last bought one? How about $200? Or are you going to use what you have for another year and grumble when the time to buy finally arrives?

I know that I'm going to try and shop smarter and be a little more frugal because of rising prices, and I expect many of you to feel the same way.