Omdia view
Summary
The deployment of AI infrastructure has placed substantial pressure on electronic component manufacturing and raw material supply chains. This affects multiple industries through 2026 and beyond. The telecommunications sector faces acute shortages of memory chips and copper, affecting network deployment, decommissioning costs, and smartphone pricing. AI data centers’ energy requirements are also elevating electricity costs, increasing operational expenditures for network operators. This infrastructure expansion may paradoxically constrain AI adoption by making access economically prohibitive.
Memory components and copper materials: limited bill-of-materials impact with significant market consequences
The substantial expansion of AI and cloud data center infrastructure has generated unprecedented demand for advanced memory technologies, including DDR5 and high-bandwidth memory solutions, thereby intensifying supply chain competition and driving DRAM prices to historic highs. These memory components are essential for 5G base station operations and advanced network infrastructure, including edge servers and routing equipment.
Industry responses demonstrate a pronounced disparity between established market leaders and smaller market participants. During Nokia’s 4Q25 earnings presentation, Chief Executive Officer Justin Hotard categorically dismissed concerns about memory shortages, emphasizing that DRAM accounts for a minimal percentage of the company’s bill of materials and is procured through long-term contractual agreements. This position is mirrored at other major vendors, including Ericsson and Huawei, which benefit from economies of scale and established supplier partnerships.
Smaller vendors confront substantially different market conditions. Without comparable negotiating leverage, these organizations remain fully exposed to volatile DRAM pricing and supply constraints. For vendors already facing competitive pressure from the dominant three telecom equipment vendors, memory shortages may make them even less competitive. They are already finding it tough to compete, as evidenced by NEC’s recent withdrawal from the base station market.
In contrast, copper shortages present unanticipated financial opportunities for operators executing fiber network transitions. Telstra has generated more than $130m from copper asset sales over two years, while BT has secured more than $140m in advance payments for forward copper asset sales. Industry specialist TXO estimates that operators may have collectively realized up to $720m from copper sales in 2025, a rather insignificant amount compared to total revenue (e.g., BT reported $28bn in revenue in 2025), but it strengthens the case for a faster transition to fiber. However, the extraction of legacy copper infrastructure frequently proves cost-prohibitive or technically unfeasible, while decommissioning processes are subject to extensive regulatory oversight that significantly extends implementation timelines.
Smartphone price increases: AI’s self-limiting paradox
Direct device sales can exceed 20% of total revenue for operators, particularly within North American and European markets, rendering DRAM shortages a critical factor affecting revenue performance. According to a recent Omdia report, DRAM Eats Smartphones: What Matters for Vendors to Succeed In 2026 (see Further Reading), memory and storage components constitute 10–33% of smartphone bill of materials, with devices priced below $400 experiencing the greatest impact from cost increases.
The same report denotes that market dynamics will favor manufacturers maintaining the largest volume and value market positions across smartphones, personal computers, and tablets, enabling these entities to secure preferential pricing arrangements and priority supply agreements with DRAM manufacturers, disadvantaging smaller competitors. Mid-tier and entry-level smartphones will experience substantial price increases throughout 2026, reducing consumer demand and compressing operator margins on device sales.
These conditions necessitate comprehensive reviews of subsidy strategies, likely resulting in extended contract durations or increased upfront payments and monthly installment requirements. More significantly, reduced device market activity will decelerate the adoption of emerging technologies, including 5G and AI capabilities. The fundamental contradiction is evident: the infrastructure development required to support AI capabilities will simultaneously constrain AI adoption within mobile market segments where the technology demonstrates the greatest potential for transformative impact.
This market dynamic may compel AI companies to fundamentally reassess their commercial strategies, potentially requiring subsidization of connectivity services or device costs to accelerate market penetration and establish competitive positioning, a development that could turn advantageous to telecoms operators.
Appendix
Further reading
DRAM Eats Smartphones: What Matters for Vendors to Succeed In 2026 (January 2026)
DRAM Market Tracker – 4Q25 Brief (January 2026)
Nokia, “Nokia 4th Quarter & Full-Year 2025 earnings conference call/webcast,” (January 2026)
Author
Ronan de Renesse, Vice President, Telecoms Research
