BT warns UK smartphone prices will rise as AI eats the chip supply

BT Group used its full-year results on 21 May 2026 to warn the City of London, and indirectly UK consumers, that the AI datacentre boom is eating the memory chip supply, and that the bill is heading for the smartphone shelves. Chief executive Allison Kirkby said the chip shortage will put pressure on pricing in certain parts of the market, the clearest statement so far from a major UK operator that the next round of phone price rises is not just about contract inflation.

This article explains what BT actually said, the supply numbers that sit behind the warning, who is already paying the difference, and what a UK bill payer can reasonably do about it before the next renewal.

What BT actually said

Speaking on the FY2025-26 earnings call on 21 May 2026, Kirkby told investors and analysts that BT expects pricing pressure on smartphones and home routers over the coming 18 months. The quote that landed in the trade press the next morning was:

With chip shortages everywhere, that will put pressure on pricing in certain parts of the market.

BT does not set smartphone prices itself. Apple, Samsung, Google and Xiaomi do. What BT does is pay for the handsets it bundles with airtime contracts and, more importantly, set customer expectations for the bills that come out of those bundles. Kirkby’s framing is unusually direct for a UK operator. EE, Vodafone, O2 and Three all raised contract prices by up to 13.4% in April 2026 under their standard CPI plus 3.9% clauses, but none of them publicly linked it to the chip supply.

Why an AI boom shows up on your phone bill

The mechanism is not obvious unless you trade chip futures, so it is worth unpacking it.

Smartphones and AI datacentres both run on memory chips made by the same three companies: Samsung, SK Hynix and Micron. Datacentres want a specific type called High-Bandwidth Memory (HBM), which sits next to GPUs and feeds them at extreme speed. HBM is more complex to make than the LPDDR memory that phones use, and the margins are three to five times higher.

Faced with that pricing differential, the memory makers have steadily converted standard DRAM lines to HBM production. Counterpoint Research now estimates that HBM will take up 23% of total DRAM wafer capacity in 2026, up from 19% the year before, and that datacentres will absorb roughly 70% of all memory chip output through the year. Smartphones, laptops, tablets and games consoles share what is left.

When the supply shrinks and the demand does not, prices rise. IDC reported that DRAM prices were up about 110% in the first quarter of 2026 compared to the previous quarter, with NAND flash (the storage chips inside the phone) up about 147%. Apple is reportedly paying close to £55 per device for the 12 GB LPDDR5X memory in the iPhone 17, against roughly £20 to £25 a year ago. That cost lands somewhere, and the historical record says it lands on the consumer.

Who is already paying for it

You can see the new pricing on the shelves now, even if no one is calling it a chip pass-through.

• iPhone 17 launched at around £799 in the UK, roughly £100 more than the iPhone 16 launch price.
• Google Pixel 10 Pro sits at £1,199 in UK retail.
• PlayStation 5 and Nintendo Switch 2 have both implemented quiet price rises in the same quarter.
• Nothing Phone, run by Carl Pei, warned in May 2026 that 2026 will be “unprecedented”, with brands forced to choose between raising prices by 30% or cutting specifications.

Across price bands, the bill-of-materials impact is uneven. Budget phones under £150 are hit hardest in percentage terms (20% to 30% on cost), because there is no margin to absorb chip price moves. Mid-range phones (£200 to £500) take a more manageable 8% to 15% bump. Flagships in the £600-plus bracket can absorb around 10% of cost within existing margins, although Apple has chosen to pass much of that through anyway.

What a UK bill payer can reasonably do

This is not a story where there is a clean defensive play. It is a supply story, and supply stories do not have an obvious quick fix for individual consumers. That said, there are four practical positions worth considering.

Buy a flagship now, if you are buying anyway

If a new iPhone or Galaxy is already in your plans for this year, the autumn 2026 refreshes will almost certainly cost more than the current generation. Locking in today’s price on an iPhone 17 or Samsung S26 line, ideally via a SIM-only contract plus an outright handset purchase rather than a bundled tariff, keeps you out of the next round.

Hold your current phone for one more cycle

If your phone still works and the battery is fine, this is the cycle to extend. Independent service is cheaper than a new device, and the second-hand value of older flagships is likely to hold up while new ones get more expensive. Which? has the same advice for UK readers worried about cost-of-living pressure.

Move down a tier on your next upgrade

Mid-range phones from Google’s Pixel A line, Samsung’s A-series and Nothing’s main range offer most of the camera, screen and 5G features that mattered at the high end three years ago. The percentage cost rise on these has been smaller, and they are less exposed to the HBM pinch than premium flagships built around the latest memory specs.

Watch your monthly contract uplifts

April 2026 contract rises of up to 13.4% are already in force across EE, Vodafone, O2 and Three. The chip shortage is a separate pressure on the handset itself, not on the airtime tariff, so a SIM-only deal with a phone bought outright keeps the two pressures apart. Our Vodafone how-to guides cover the mechanics of moving to SIM-only or switching networks under Ofcom’s End-of-Contract Notification rules.

What to watch next

Three things are worth tracking from a consumer angle in the second half of 2026.

1. Whether other UK operators follow BT and name the chip shortage publicly, or keep blending it into CPI clauses. The transparency makes a difference at the point of customer complaints to Ofcom.
2. Apple, Samsung and Google’s autumn flagship pricing. If the next iPhone or Galaxy widens the gap on this year, the trend BT flagged is confirmed.
3. HBM and mobile memory supply guidance from Samsung and SK Hynix in their quarterly reports. The chip industry is the one that knows when this loosens, and the lead time is measured in years rather than months.

For ongoing UK consumer angles on regulation, scams and operator behaviour, our Consumer protection UK hub tracks the wider story of who is supposed to be defending the bill payer, and how well that is working.