1. Leading smartphone-makers including Apple Inc., Huawei Technologies Co. Ltd., and Xiaomi Corp. have increased prices across much of their new flagship lineups ahead of China’s National Day holiday, a departure from the previous norm of offering more powerful devices at broadly stable prices [para. 1]. Specifically, Xiaomi’s 18 Pro starts at 5,999 yuan ($896), up 1,000 yuan, while Huawei’s Mate 90 standard model is nearly 28% more expensive, and the 2-terabyte version of the iPhone 18 Pro Max costs 3,500 yuan more than its predecessor [para. 2]. Local manufacturers are also emphasizing premium versions, offering fewer low-end options, and raising prices on existing phones instead of discounting older models [para. 3].
2. The underlying driver is a supply-chain squeeze caused by the artificial intelligence boom, as data center operators compete for memory chips, pushing up costs for consumer-electronics makers [para. 4]. TrendForce data shows server DRAM contract prices rising about 64% cumulatively in the second half of 2025, with a further cumulative increase of about 270% projected for 2026, while suppliers prioritize AI data centers over consumer electronics [para. 8]. Qualcomm China Chairman Frank Meng noted he has never seen memory prices increase four or five times in a year, conservatively estimating that no significant increases will occur by the end of 2027, but high prices will continue for some time [para. 9]. This impact is particularly severe for cheaper phones, with Omdia estimating that memory accounted for nearly 60% of the bill of materials for phones priced below $400 in the first quarter of 2026 [para. 10].
3. The timing is difficult as China’s market contracts, leaving less room to absorb increases or persuade consumers to pay more [para. 5]. Consequently, cheaper phones are becoming harder to produce profitably, and premium devices are taking on greater importance [para. 6]. Counterpoint reports that more than 40% of smartphone models have seen price increases this year, lifting the global average retail price by 15%, with some models up nearly 100%, while China’s retail increase has been more moderate at about 10% [para. 11][para. 12]. Demand is weakening, as China’s smartphone shipments reached about 66 million units in the second quarter of 2026, down 4.3% from a year earlier, marking the fifth consecutive quarterly decline, with a double-digit decline projected for the year [para. 14].
4. Manufacturers are adjusting their portfolios to make increases feel less pronounced, adopting Pro Max branding across top models (Vivo, Oppo, Honor) and launching only Pro and Pro Max versions at Apple and Xiaomi events [para. 15]. The pressure is most acute at the bottom: Oppo’s Realme withdrew from the Chinese market, Meizu suspended domestic hardware projects, and shipments of smartphones priced below $100 nearly halved year-on-year in the second quarter of 2026 [para. 16][para. 17]. According to IDC’s Francisco Jeronimo, the era of the cheap smartphone has ended, and winners will be vendors with scale and supply leverage [para. 18].
5. Competition among leading brands is shifting. In the second quarter, Huawei led the Chinese market with a 22.6% share and grew shipments nearly 25%, while Apple followed with 18.1% and grew about 20%, leaving Oppo, Vivo, Xiaomi, and Honor with year-on-year shipment declines [para. 19]. Apple’s global smartphone revenue grew 22% year-on-year, a record for the quarter, while Xiaomi, Vivo, and Oppo each saw revenue fall at least 10% [para. 20].
6. Beyond rising costs, hardware differentiation is becoming harder, with manufacturers offering similar configurations in cameras, battery life, and processing power, and imaging competition increasingly coming down to software style, says Counterpoint’s Lin Keyu [para. 22][para. 23][para. 24]. Foldable phones offer one possible route: IDC projects global shipments of foldables will reach 22.9 million in 2026, up 12.6%, but still only representing about 2% to 3% of the overall market [para. 25]. Apple finally entered the category with the iPhone Duo at $1,999 (15,999 yuan in China), and IDC predicts Apple will exceed 17 million foldable units by 2027, roughly 40% of the global market [para. 26].
7. AI is the other major bet, with manufacturers embedding agents into operating systems, such as Xiaomi’s Super AI 2.0 which can create itineraries from saved preferences [para. 27]. However, no manufacturer has established a decisive advantage, as Chinese brands are moving at a similar pace and consumers lack strong usage habits [para. 28]. The battle for the AI phone also hinges on ecosystem access: the Nubia phone with ByteDance’s Doubao Mobile Assistant only had three third-party apps offering direct interfaces, forcing agents to rely on slower, less secure screen reading [para. 30][para. 31]. Meng of Qualcomm China states the next phase will test which companies built the most complete ecosystems, where China’s supply chain and user base are advantages, though the market remains highly competitive [para. 32].
AI generated, for reference only
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