Chips and memories, the risk of a new “tax” on smartphones

The demand for artificial intelligence, inside and outside smartphones, is increasing pressure on chips and memories, with the concrete risk of new price increases and less predictable availability of components.

From the interviews collected at the Mobile World Congress in Barcelona, ​​different strategies emerge but a common point: it’s not enough to cut priceswe need to protect the supply chain and, above all, give more value to the devices to withstand the impact of costs.

Motorola: no stocks, it matters who manages to get the parts (and produce)

Giorgia Bulgarella, Marketing Director of Motorola, denies the idea that companies can take shelter by stocking up. “The smartphone market is not a market where you can stockpile” he says, “and the reason is simple: the just-in-time logic and the very rapid obsolescence of the models make it risky to immobilize components”.

The real watershed, according to Bulgarella, is another: “the difference between those who will be able to produce smartphones and those who will not”, or rather, more precisely, “will be able to produce the quantities” required by the market.

On the price front, Motorola recalls analysts’ estimates. “Canalys appreciates it an increase of around 17% more or less” increase, with different impacts per segment. And one consequence could be a further compression of the entry-level: if the memories cost more, “the entire entry segment no longer makes sense to exist”, because it would mean “wasting a memory to sell a phone for under 100 euros”.

To handle the pressure, Motorola claims the advantage of ‘team play’ with Lenovo: “Dealing as a global company this allows us a much more important negotiation”, also because Lenovo is a strong player in the PC sector, where the supply chain is a historical theme.

E the season of infinite discounts could be reduced: “Black Fridays, which went from two days to two months, brought a sector to its limits,” says Bulgarella, so bundles and services are more likely than aggressive price cuts.

Honor: partnership on memories and “more features” to justify the price

Pier Giorgio Furcas, head of sales at Honor, the most delicate point is memory. “Growing demand is driving up costs” and for this reason “we have a very strong partnership with our memory suppliers”. If costs were to rise “more than normal”, the counter-move is move the value bar: “we can’t do anything other than add features to the phone to further justify the value of a product that increases in price”.

A strategy also strengthened by Dimon hu Xin, Honor Western Europe cmo, who defines the tension on the supply chain as “a situation that affects the entire industry” and “a common challenge for the entire sector”. And on the possible “price change” he adds a key point: “it will not only be due to the cost of the components, but also why we will bring more value to consumers: AI, imaging and durability”. The stated objective is “to offer the best experience and value, at every price range”.

For Huawei, “on-device” AI remains the preferred choice

Per Andreas Zimmer, Head of Product at Huawei, the AI ​​challenge is fought on the devicewith a consequent need for greater computing power and memory already on the smartphone or tablet. “Historically we’ve tried to put as much as possible on the device,” he says, “the benefit is not just privacy, but also speed with virtually zero latency.” The cloud remains useful when external information or broader models are needed, but “when possible, the solution” should be on-device.

Samsung: integrated supply chain and focus on innovation

Nicolò Bellorini, vice president of Samsung, puts the group’s main “shield” on the table: “Samsung’s great advantage is that of have an integrated supply chain end-to-end”, which allows us to “plan well for the future, production lines and supplies” to “always satisfy the demand of our consumers”.

On the price, however, it holds back the idea of ​​a mechanical relationship with cost of components: “The price is a complex variable, it does not depend only on the cost of a material” but “in particular on the innovation brought to the products”, i.e. what really interests the consumer.

Less “super low cost”, more value and more control

Read as a whole, the manufacturers’ reaction to the possible shortage (and expensive components) moves along three axes: protecting the supply chain, defending prices by increasing perceived value and moving part of the AI ​​to the device and giving more control over privacy and data.

If chips and memories become the new bottleneck, there’s no going back with discounts: we try to absorb the backlash by making the smartphone more useful, longer-lasting and more defensible in terms of price.