BT Warns Smartphone Prices May Rise Amid AI-Driven Chip Shortage

BT has warned that smartphone prices could increase as technology companies compete for semiconductor chips due to the artificial intelligence boom, tightening supply chains.

Chief Executive Allison Kirkby said she expects shortages as tech firms purchase large quantities of memory chips to power AI datacenters.

“It’s common knowledge that the chip market is under demand by the rise in AI. We are working very proactively with our suppliers,” Kirkby said.

Price increases would primarily affect smartphone handsets but could also impact router costs, she said, noting that memory chips are essential for most modern electronics.

“I’m sure the industry with its partners will do the best it can to minimise the impact on pricing in the marketplace,” Kirkby added. “But with chip shortages everywhere, that will put pressure on pricing in certain parts of the market, not just in our sector, going forward.”

Kirkby said she has not yet seen price hikes from premium handset manufacturers but expects companies such as Apple to pass higher costs to customers.

“I’m sure Apple will do the best to minimise any supply chain weaknesses,” she said.

Apple’s iPhone 17 starts at £799, with the 17 Pro model at £1,099; Google’s Pixel 10 Pro retails for about £1,199.

Major laptop and phone manufacturers including Microsoft, Samsung and Dell have already raised prices in response to chip shortages and removed cheaper models from their lineups.

Sony has also increased the price of its PlayStation 5 consoles, including a $100 (£75) hike in the US, while Nintendo confirmed a price rise for its Switch 2.

Updated US prices effective April 2 set the standard PS5 at $649.99, up from $549.99. Nintendo’s Switch 2 will rise from $449.99 to $499.99 in the US in September, and from €469.99 to €499.99 in most European countries.

A global investment surge in AI has driven massive expansion of server farms containing high-end memory chips, consuming current supply and future production capacity, creating shortages and raising electronics costs.

BT plans to cut costs by an additional £700 million over the next four years, reporting flat full-year earnings and declining revenue.

The company increased its cost-saving target to £3.7 billion from £3 billion and extended its restructuring program by one year to March 2030.

BT lost 203,000 broadband customers in the first three months of the year, bringing total losses for the year ending March to 825,000—slightly below its forecast of 850,000. Kirkby said mobile customer churn was at an all-time low.

The telecoms company reported a 4% decline in underlying revenue to £19.7 billion for the year ending March, while pre-tax profit rose 8% to £1.4 billion.