(Yicai) Nov. 27 -- The surge in memory prices that began in the second half of this year is spreading from the upstream to the downstream of the supply chain in China at an unprecedented speed, affecting various consumer electronics, including phones and home network attached storage devices, according to industry insiders.

Consumer electronics manufacturers are entering the "most difficult pricing season" and need to seek a difficult balance between controlling production costs and maintaining market share, the insiders told Yicai.

The prices of mechanical hard drives and solid-state drives have jumped around 30 to 40 percent since the middle of last month, while that of computer memory doubled, the insiders pointed out, adding that the price hikes will likely continue next year.

If memory prices continue to surge, phone makers may also increase prices to offset the pressure brought by rising raw material costs, Huang Yuxuan, an analyst at leading global provider of market intelligence TrendForce, told Yicai.

Handset manufacturers cannot stop buying memory despite the significant increase in prices because this will lead to a rapid drop in their market shares, Huang pointed out.

The memory chip inventory of leading firms is about enough for less than two months of production, while some have dynamic random access memory for less than three weeks, the insiders noted. Suppliers raising prices by almost 50 percent have increased the pressure on phone makers to do the same.

Smartphone giant Oppo Mobile Telecommunications raised the price of its new Reno15 series and peer Honor Device raised its Honor 50 series by around CNY200 (USD28.25) respectively from the previous generations. Realme, iQOO, Redmi, and other mid-range phone brands have increased prices by CNY100 to CNY300. 

The hike in memory prices is mainly due to the explosive demand for building artificial intelligence infrastructure, which has led to a significant supply gap in such products, with the trend to continue next year, said Wang Yuqi, an analyst of TrendForce. It is necessary to pay close attention to whether demand for consumer products will be suppressed due to the increase in product prices, she added.

The price of AI NAS devices increased by about 20 to 30 percent since China's Double 11 shopping festival earlier this month, an executive from supplier ZSpace told Yicai.

"The sharp rise in the price of memory products has already dealt a heavy blow to low-end smartphone manufacturers that have relatively low profit margins, with some products logging negative profit margins, "Huang said to Yicai. "Due to expectations that the trend will continue, phone makers have begun to reduce output of products with negative profit margins."

Shenzhen-based Transsion Holdings, a smart devices maker that mainly sells its products to Africa, highlighted the operational pressure brought by rising costs in its third-quarter financial report, with its net profit plunging 45 percent in the nine months ended Sept. 30 from a year earlier, despite its operating revenue dropping only 3.3 percent.

Editors: Tang Shihua, Martin Kadiev