New Delhi: Nothing CEO Carl Pei has given a serious warning to the smartphone consumers: 2026 will be the last year when phones will get cheaper, and instead it will become significantly expensive. Pei says that the industry is entering the largest cost crisis in over a decade, but this is not due to flashy new features, but rather due to a vicious supply squeeze of memory and core components.

The phone makers relied on a single rule over the last 15 years. Such components as storage and displays were always becoming cheaper. That enabled brands to include superior cameras, quicker chips and additional storage without increasing costs. Pei declares that rule is now violated. And it is not coming back.

AI is draining the world’s memory supply

For 15 years, phone makers could rely on falling memory and storage prices to deliver better phones without raising prices. That model has now broken. AI servers use huge amounts of high-performance memory, and they are buying it in bulk. This is pushing smartphone brands into direct competition with trillion-dollar tech companies for the same components.

In some cases, memory prices have already tripled. Parts that cost under $20 last year can now cost over $100 in premium phones. Memory is no longer a small line item. It is quickly becoming one of the biggest costs inside a smartphone.

Old pricing model is no longer working

When core parts get more expensive, something has to give. Brands now face two choices: increase prices or cut specifications. Many phones in 2026 could become 30% more expensive, especially at the high end.

Budget and mid-range segments will feel the impact the most. These models depend on tight margins. If costs rise too much, some devices will simply disappear. Industry analysts expect certain markets to shrink by up to 20% as a result.

Why brands are rethinking what matters?

The specs race has become too costly to sustain, and phone manufacturers have to switch gears. There is no longer a quest to pursue larger RAM and storage figures. The issue at hand is the feel and appearance of the phone and its functionality in everyday life.

This is already being adopted by such brands as Nothing, which has prioritised design and user experience over raw specifications. With the increasing cost of hardware, the software, design and usability over a long period of time will be a significantly larger part of the purchase decision.

According to Carl Pei, 2026 marks a turning point. The long-running race to offer more RAM, more storage, and more power for less money is coming to an end. From now on, companies will have to compete on experience, design, and software rather than just hardware.

“The era of cheap silicon is over,” Pei says. What comes next, he believes, is a smartphone industry built around intentional design and meaningful user experience, not just bigger numbers on a box.