Taiwan Semiconductor Manufacturing Co. Ltd. is poised to profit as rising memory prices lead smartphone consumers to gravitate toward more expensive devices, according to Neil Shah, co-founder of Counterpoint Research. Higher memory costs are impacting the lower end of the smartphone market, driving demand toward premium models such as iPhones and advanced Android devices that utilize sophisticated chips.
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Counterpoint anticipates that consumers will increasingly opt for higher-priced smartphones due to escalating component costs, which are making budget models less appealing. Shah noted that a smartphone that cost around $150 two years ago now retails for approximately $300, often without substantial upgrades in specifications. As a result, many consumers are likely to spend around $500 for devices that offer improved cameras, enhanced memory, and stronger processors. This trend could favor firms like Taiwan Semiconductor, which provides chips for high-end smartphones.
The demand for low-end smartphones is expected to decline significantly, with Shah projecting a nearly 14% drop this year and an additional 3% to 4% decrease next year. He estimates that the financial pressures could remove approximately 100 million to 150 million smartphones from the market over the next three years. As entry-level devices become less accessible, consumers may turn to pricier smartphones or consider second-hand options.
Counterpoint further forecasts that this shift in component costs could eliminate over 230 million shipments of smartphones priced below $200 by 2030. Chinese manufacturers, who dominate the low-cost segment and depend heavily on suppliers in both China and Taiwan's semiconductor sector, face considerable challenges. Shah indicated that these companies may need to revise their product lines and lessen their involvement with lower-margin models as production of inexpensive devices becomes less profitable.