Smarter phones, steeper prices: AI could push flagship costs up 15% in India

New Delhi: The integration of artificial intelligence (AI) could become a double-edged sword for smartphone brands, with industry executives and experts predicting a 10-15% increase in flagship handset prices in the coming quarters in India due to rising chipset and memory module costs, vital for unlocking full AI capabilities.

Of late, AI and generative AI (GenAI) capabilities have also trickled into mid-range smartphones, spurred by handset brands and chipset makers’ initiatives. However, analysts cautioned that if the rising costs are passed on to mid-range model buyers, it could further dampen shipments in India this year.

“With the rising chipset costs and also corresponding memory chipset costs to bring the full AI capabilities in a smartphone, the overall cost to manufacture a flagship smartphone will rise,” Neil Shah, vice president at Counterpoint Research, told ET.

“After a point, brands will not have enough room to adjust the BoM (bill-of-materials) costs to keep the pricing the same year after year and will have to raise prices for flagships by at least 10-15% as they move to chipsets with advanced nodes,” Shah said.

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Thomas CH, senior director (product marketing) at Taiwanese chipmaker MediaTek, said the cost to offer premium performance in a smartphone is increasing, but added that consumers are willing to pay more to buy a premium smartphone.

On their part, chipset makers and other vendors are attempting to control costs, he said. “MediaTek is part of a very complex supply chain, which also includes memory, display, and camera, and others. Every industry is doing its best to control the costs,” he said.

The International Data Corporation (IDC) noted that currency fluctuations are also weighing on chipset prices.

Upasana Joshi, research manager, IDC, said passing on higher costs to consumers could further crimp smartphone sales in India, a market experiencing subdued demand. She added that since AI capabilities are already available in devices priced at over ₹30,000, a price hike could have an industry-wide effect.

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