The recent price hike on the iPhone has not come as a complete surprise, but the way consumers and industry players respond to it is something worth thinking about. Over the past few years, electronic products have generally seen a downward trend in prices, with consumers growing accustomed to getting better quality at lower costs. However, this trend began to shift at the start of last year, when prices for smartphones, computers, and home appliances started to rise—and they’ve kept climbing ever since.
In early 2017, Meizu announced a RMB 100 price increase for its 16GB and 32GB versions of the Note5 phone, citing rising BOM (Bill of Materials) costs. BOM refers to the breakdown of a product’s components, including materials, parts, and manufacturing processes. While BOM pricing is rarely disclosed publicly, it became a key factor behind the recent price adjustments by several major brands, including Lenovo, Xiaomi, and LeTV. These companies raised their product prices by around 100 yuan.
The pressure on mobile phone prices wasn’t sudden. The issue of flash memory shortages had already been visible in 2016. Since last year, memory and SSD prices have steadily increased. For example, 8GB DDR4 memory went from around 200 yuan to over 500 yuan. Initially, flash memory manufacturers prioritized supplying mobile phones, but by 2017, the demand was so high that they had to raise prices to ease supply chain pressures.
According to Pan Jiancheng, chairman of Qilian Electronics, flash memory is essential for almost all electronic devices. This shortage has affected not only smartphones and PCs but also automotive, healthcare, education, and home appliance industries.
With the release of the new iPhone, the trend of price increases seems set to continue. Flash memory shortages have persisted for over a year without a clear solution. IDC data shows that global data generation will grow from 44ZB in 2020 to 160ZB by 2025. However, flash memory production hasn’t kept up. In the second half of 2017, a single iPhone model consumed the entire annual flash memory supply, creating a 30% gap in availability. Other brands and SSD manufacturers also faced severe difficulties in securing flash chips.
The root cause of the shortage lies in the technical challenges of 3D NAND technology. Although original manufacturers have started mass-producing 3D NAND, the complexity and longer production times have limited output. As a result, NAND Flash prices have surged to historic levels. According to China's flash memory market, the price per GB of NAND Flash rose from $0.12 in 2016 to $0.30, while mainstream eMMC prices jumped over 60%, and SSD prices increased by more than 80%.
Some 8GB memory modules now cost up to 769 yuan, and the shortage is expected to persist for some time. Even though 3D NAND production capacity has improved, it still falls short of meeting the demand for 1.5 billion smartphones. Additionally, consumer interest in higher-capacity models like 128GB or more has further strained the supply. Original factories are prioritizing server-grade SSD markets, leaving less available for regular consumers.
The problem isn't just about price hikes. Consumers are also facing issues with product quality. Some domestic SSDs and memory modules are made from recycled "junk" flash chips—used in servers and then repurposed. These chips are stripped of their original logos and rebranded, often leading to unreliable products. Low-quality USB drives, for instance, can be sold for as little as 30 yuan, despite having poor performance and reliability.
This situation affects not only PC users but could soon impact the smartphone industry if the flash memory shortage continues. Whether it's a phone, a PC, or a USB drive, purchasing substandard products can lead to financial loss and even data loss.
For downstream manufacturers, the rising cost of flash memory has created a challenging environment. While original manufacturers profit from the price increase, smaller manufacturers struggle to compete. Many are forced to sell at a loss, watching counterfeit products flood the market.
From an industry perspective, local storage vendors lack strong R&D capabilities, relying mainly on assembly and sales. While some companies like Ziguang Group and Yangtze River Storage are investing heavily in developing their own memory chips, progress remains slow. Without breaking free from technological monopolies, these companies will continue to face supply constraints and limited profitability.
Ultimately, software development and hardware control are crucial for downstream vendors. To match the performance of original factory products, they must invest in testing and improving their systems through real-world use. Only through long-term consumer feedback can they close the gap and build trust in the market.
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