The rapid acceleration of AI features and advanced multimedia capabilities in modern smartphones is pushing consumers toward higher-capacity devices. IDC reports that 512GB has become the fastest-growing storage tier in 2025, driven primarily by the need to support AI-enhanced imaging, local machine learning tools and increasingly heavy apps. As users now hold onto devices for 40 to 45 months, storage has become a decisive factor in upgrade planning. Meanwhile, storage options below 128GB continue their decline at rates between 10% and 14%, highlighting a long-term shift to larger memory bands.
Impact of global memory shortages
This shift is occurring during a period of significant pricing pressure caused by a global memory shortage. Record-breaking demand for chips supporting AI infrastructure has transformed the supply landscape. Memory manufacturers are prioritising high-margin components required by data centres, including High Bandwidth Memory, DDR5 DRAM and enterprise-grade NAND flash. Large cloud providers are locking in long-term supply agreements, creating market tightness that affects mobile DRAM and smartphone NAND availability. The result is a sharp supply constraint for the components used in consumer handsets.
Manufacturing constraints fuel higher prices
Manufacturers had reduced production capacity during the period of oversupply in 2023 and 2024 and the industry cannot quickly scale output to meet the sudden surge in demand. At the same time, older memory standards such as LPDDR4X are being phased out, constraining mid-range supply and putting upward pressure on prices across the board. Production lines are being retooled for more advanced nodes, extending the mismatch between supply and demand.
OEM pricing pressure influences market dynamics
Smartphone manufacturers face contract price increases for DRAM and NAND and some have already confirmed that retail smartphone pricing is rising as a result. Premium models, especially those offering 1TB or more, have become significantly more expensive. The cost gap between a 512GB device and a 1TB option is now difficult for many consumers to justify, especially as overall device pricing rises in tandem with memory demand.
Secondary market gains momentum
This shift has direct consequences for the global secondary market. As new premium smartphones become more expensive due to rising storage costs, price-conscious consumers increasingly turn to the secondary ecosystem. A recent Kantar study commissioned by Recommerce shows that nearly 70% of used smartphone buyers prioritise affordability. With widening price gaps between new and used devices, the secondary market is positioned for accelerated growth. Higher memory pricing, driven largely by the structural AI-driven memory shortage, may therefore provide an unexpected but substantial boost to refurbishment, recommerce and circular tech adoption worldwide.
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