I bought a Samsung Galaxy S22+ back in October 2023, and I’ve been pretty happy with it. It’s handled most of what I’ve needed, so replacing it hasn’t felt particularly urgent.
Still, I was tempted to upgrade to the Galaxy S25+. The newer processor, cooler features, and Samsung’s AI offerings had me sold, for the most part. But whenever I consider making the switch, I keep coming back to one question: Is the upgrade really worth the money when my current phone still works?
It’s a dilemma most consumers are facing now.
IDC expects the average smartphone selling price to reach $581 in 2026, up 27.6% from last year. That doesn’t mean every phone is getting that much more expensive, but it shows how the market is changing.
Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC), which makes advanced chips for Nvidia (NVDA), just reported a roughly 69% jump in quarterly profit.
Yet CEO C.C. Wei warned that rising component costs and economic uncertainty are squeezing price-sensitive consumer markets, even as AI demand continues to soar.
TSMC’s AI profits soar while smartphone shipments plunge 20%
By most measures, Taiwan Semiconductor just posted the kind of quarter investors dream about.
Q3 net profit was up 69% from a year earlier to about $23.6 billion, on $46.7 billion in revenue. Management also forecast $52.3 billion to $54.3 billion in Q4 sales.
One of the big reasons for this outsized demand that’s flowed through its bottom line is customers such as Nvidia. Nvidia designs the AI chips powering many data centers, but TSMC manufactures its most advanced silicon and provides critical packaging.
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Yet CEO C.C. Wei struck a remarkably different tone on those markets during the earnings call, even as demand for advanced AI chips remains “extremely robust.”
“We continue to observe [that the] consumer and price-sensitive end market segment are being challenged due to the impact of rising component prices and macroeconomic uncertainties,” he said during the earnings call.
His caution about planning for 2027 was tough to miss.
Those concerns are mirrored by independent researchers. Counterpoint Research said worldwide smartphone shipments fell 20% year over year in Q3, their weakest quarterly showing in 14 years.
IDC estimates global PC shipments declined 20.1% over the same period. These are shipments of finished devices, not orders placed with TSMC.
Prices tell the other half of the story.
IDC expects the average smartphone selling price to rise 27.6% this year to $581. Working backward, that implies roughly $455 last year, an increase of about $126. That’s a change in the global sales mix and average, not proof the same phone suddenly costs $126 more.
That said, the big twist is that TSMC’s own smartphone-platform revenue actually rose 10% from the previous quarter. A chip supplier can prosper while buyers postpone replacements.
The big question is whether manufacturers can continue selling pricier technology when consumers are increasingly reluctant to upgrade.
Bloomberg / Getty Images
AI data centers are squeezing the memory supply for phones and PCs
The pressure starts off with a big shift in semiconductor manufacturing priorities.
TrendForce says memory suppliers are directing more capacity toward profitable server applications, which leaves smartphone and PC makers competing for tighter supplies.
For perspective, these aren’t the same advanced processors TSMC manufactures for Nvidia or Apple (AAPL). DRAM helps devices run multiple applications, while NAND flash stores photos, programs, and files. Both are critical components in everyday electronics.
And their prices are climbing.
TrendForce expects Q4 contract prices for conventional DRAM to rise 10% to 15%, while NAND flash could increase 15% to 20%. Those are component-price forecasts, not retail price increases.
That leaves manufacturers with some difficult choices. They could absorb higher costs, increase prices, reduce memory or storage specifications, or abandon less profitable models. TrendForce says some PC makers are already reducing SSD capacities to manage expenses.
IDC warns that affordable smartphones are particularly vulnerable.
The affluent buyers may tolerate higher prices, but budget-conscious consumers have less room to stretch. Even holding prices steady could mean offering fewer features.
The frustration is also evident in Reddit discussions, where a user named Evonos perfectly encapsulated those sentiments in an r/android thread: “Yes , I got a redmi note 13 pro plus, I just checked phones either have ridiculous prices to the point that the redmi note 13 pro ( non + ) is now more expensive than my phone, or they have literally weird worse specs in many areas than my phone and a higher price.”
Meanwhile, TSMC’s numbers explain why its business can thrive.
High-performance computing accounted for 68% of quarterly revenue, or roughly $31.8 billion, according to my calculation. Smartphones contributed 21%, approximately $9.8 billion. Importantly, not all high-performance computing revenue comes from AI.
Interestingly, TSM stock has outperformed Nvidia so far this year, gaining 42% year to date compared to Nvidia’s 19% gain over the same period, Seeking Alpha noted.
So the real question is how much longer device makers can absorb those costs before shoppers face tougher choices.
TSMC’s 2027 warning puts another question before Apple and PC makers
As we look ahead, CEO C.C. Wei is looking to approach 2027 a lot more cautiously, on the back of elevated component costs and economic uncertainty in price-sensitive markets. Demand for advanced AI chips, meanwhile, remains exceptionally strong.
Apple offers an early test. Reuters, citing Nikkei Asia, reported that Apple reduced initial iPhone 18 Pro component orders by at least 15%. Importantly, though, it’s not necessarily linked to weaker demand, as launch schedules, product mix, and inventory decisions can influence orders.
Wei also indicated that TSMC’s pricing varies by technology, manufacturing location, and customer market. Higher manufacturing costs therefore won’t translate into identical price increases across phones and PCs.
Manufacturers have choices, although none is painless.
They could charge customers more, accept thinner margins, trim memory and storage, or use discounts and financing to encourage upgrades.
Relief may take time. TrendForce anticipates memory constraints continuing in 2027, while IDC suggests meaningful supply improvement could take longer. That said, I’d watch three signals: device selling prices, actual shipments, and memory contract costs.
If prices remain high while sales volumes weaken, smartphone and PC makers could face a difficult dilemma over how to restore affordability without sacrificing features or profitability.
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