Nothing will raise smartphone prices in 2026 due to RAM shortages, Carl Pei confirms

Nothing CEO Carl Pei warned that rising AI-driven memory demand is forcing the company to plan price increases for its smartphone portfolio and to move some upcoming A-series products to UFS 3.1. Pei cited industry estimates that memory modules which cost less than $20 a year ago could exceed $100 by year-end for top-tier models and suggested hypothetical price rises of "30% or more" for some brands. The shift signals margin pressure across consumer electronics supply chains and raises the prospect of product-price pass-through that could weigh on demand, while offering incumbents an opening to compete on software and user experience rather than raw specs.

Analysis

Market structure: Rising AI-driven demand for RAM and reported module-cost moves (examples cited: <$20 → potentially >$100) make DRAM/NAND suppliers (Micron MU, Samsung SSNLF, Western Digital WDC) structural winners with improved pricing power; OEMs that can pass through costs (Apple AAPL, Samsung) will defend margins while low-cost brands (Xiaomi 1810.HK, other China OEMs) will face margin squeeze or share loss. Expect smartphone ASPs to rise 10–30% for mid/high tiers in 2026 if memory cost shock persists, compressing volumes by an estimated 5–15% among price-sensitive buyers.

Risk assessment: Tail risks include a 12–18 month capex response that creates oversupply and a >30% crash in memory prices, or regulatory action on alleged price-fixing; a demand shock (GDP or credit) could amplify unit declines. Short-term (days–weeks) risk centers on inventory and contract renewals; medium-term (3–9 months) depends on H1 product launches and memory contract pricing; long-term (12–24 months) hinges on AI compute growth vs. fab capacity additions. Hidden dependencies: OEM inventory buffers, foundry yield improvements, and carrier subsidy dynamics that can mask elasticity.

Trade implications: Favor long memory exposure and premium OEMs that can pass costs: establish 1–2% NAV long MU (via 12-month call spread: buy 1.0 delta LEAP, sell 0.6–0.7 delta to fund) and 1% long WDC or SSNLF cash; set stop/profit rules: trim if MU rises 40% or DRAM spot down 20%. Pair trade: long MU, short 1% position in 1810.HK (Xiaomi) to capture margin divergence ahead of H1 launches; use 3–6 month put protection on shorts if CPI surprises. Rotate 3–5% from XLY exposure into SMH/semiconductor names within 4–8 weeks.

Contrarian angles: Consensus underestimates premium OEM share gains — Apple and Samsung can expand ASP-led revenue even as units slide, creating asymmetric upside vs. commoditized OEMs. Memory cycles historically reverse violently (2016–2018 patterns: ±50–100% price swings), so avoid levered directional bets and size exposure to a 1–2% NAV per-name basis; unintended consequence: higher handset ASPs could accelerate refurbished/aftermarket growth, pressuring new-unit demand beyond initial estimates.

Key Decisions for Investors

• Establish a 1–2% NAV long position in Micron Technology (MU) using a 12-month call spread (buy ~50–60 delta LEAP, sell 70–80 delta shorter-dated call) within the next 4 weeks; trim if MU rallies +40% or DRAM spot prices decline >20% from current levels.
• Initiate a 1% long cash position in Western Digital (WDC) or SSNLF (Samsung Electronics ADR) to capture NAND upside; set a 6–12 month target of +25–35% and stop-loss at -15% to reflect cycle volatility.
• Open a 1% short exposure to Xiaomi (1810.HK) or equivalent low-margin China OEM (cash or 3–6 month puts) as a hedge against margin compression; close or hedge if Xiaomi announces >10% ASP increase or channel inventory fall >20%.
• Execute a pair trade: long MU (1%) / short 1810.HK (1%) to isolate memory margin tailwind vs. OEM price pressure; allocate 0.5% notional to buy 3–6 month puts on the short leg as tail insurance.
• Rotate 3–5% of consumer discretionary exposure into semiconductor/AI hardware (SMH, MU, WDC) over the next 8 weeks; monitor monthly DRAM/NAND spot indices and OEM pricing announcements—add to longs if module prices remain >+50% YoY for two consecutive months.