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Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM) could benefit as rising memory prices push smartphone buyers toward more expensive devices, according to Counterpoint Research Co-founder Neil Shah.
Shah said higher memory costs are disrupting the lower end of the smartphone market while shifting demand toward premium iPhones and Android devices that use more advanced chips.
Counterpoint expects consumers to increasingly trade up because sharply higher component costs are making inexpensive smartphones less attractive.
Shah said a phone that cost about $150 two years ago can now cost roughly $300 without offering a comparable improvement in specifications.
Instead, some consumers may spend closer to $500 for devices offering better cameras, more memory and stronger processors.
That shift could benefit foundries such as Taiwan Semiconductor, which supplies chips used in higher-priced smartphones. Long-tail suppliers including United Microelectronics Corp. (NYSE:UMC) also remain exposed to changes across the broader smartphone supply chain.
Shah expects the low-end smartphone segment to decline nearly 14% this year and another 3% to 4% next year.
He estimates the cost pressures could “wipe out” between 100 million and 150 million smartphones from the market over the next three years.
Consumers priced out of new entry-level devices may instead purchase more expensive smartphones or turn to second-hand models.
Counterpoint separately forecasts that the component cost shock could remove more than 230 million sub-$200 smartphone shipments by 2030.
Chinese manufacturers dominate the lower-priced smartphone market and rely heavily on suppliers in China, along with parts of Taiwan’s semiconductor supply chain.
Shah said those companies face greater disruption as higher memory costs make inexpensive devices harder to produce profitably.
The change could force manufacturers to adjust their product lineups and reduce their exposure to lower-margin models.
Rising memory and semiconductor costs could create a different challenge for display, battery and other component suppliers.
Shah said smartphone manufacturers are trying to keep the total cost of components relatively stable despite higher memory expenses.
That strategy puts pressure on other suppliers to lower prices, limiting their ability to increase average selling prices.
Counterpoint expects much of the smartphone supply chain to feel this pressure as manufacturers balance higher chip costs against consumers’ ability to pay.
TSM Price Action: Taiwan Semiconductor shares were down 1.28% at $447.50 at the time of publication on Monday, according to market data.
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