Egypt: Rise in Mobile Phone Prices Amid Global Pressure on Memory Chips

- The mobile phone market in Egypt is witnessing a new wave of price increases, amid rising costs of device components, shipping costs, and the exchange rate of the dollar, coinciding with pressures in the global memory chip market due to increased demand, especially related to artificial intelligence applications and technologies. These pressures come at a time when Egypt is expanding its local mobile phone manufacturing, as the market currently includes about 15 brands that manufacture mobile phones and their accessories in Egypt, with local production reaching about 10 million devices by 2025, aiming to exceed 15 million devices by the end of 2026, with a local component ratio of 40%, in addition to expanding exports and increasing local added value, according to official data.

Despite the growth of local manufacturing, the industry still relies on importing several essential components, which makes the prices of phones in the Egyptian market largely linked to global component price changes, shipping costs, and the exchange rate. The global memory chip market is experiencing pressures related to the rising demand for memory components used in artificial intelligence applications, data centers, and servers, and as the needs of these sectors increase, part of the production capacity is directed to meet their demand, putting pressure on the supply of some types of memory used in consumer electronic devices, including mobile phones.

The pressures are not limited to phones, as memory and storage chips are involved in a wide range of devices, servers, and data center equipment, while the rising global demand for them leads to increased competition for supply and higher costs for some components. Mohamed Hedayat Al-Haddad, a member of the board of directors of the Giza Chamber of Commerce and head of the telecommunications and mobile division, stated that the division is moving to contact mobile phone manufacturers in Egypt to hold an urgent meeting to discuss the repeated price increases, understand their causes, and explore the possibility of mitigating them.

Al-Haddad explained that the information reaching the division indicates a rise in memory component prices, especially RAM and DRAM, due to the unprecedented demand linked to artificial intelligence applications and technologies, in addition to the impact of shipping costs and the exchange rate. Al-Haddad stated in exclusive remarks to Afaq News in Arabic that the price increases are not limited to a specific category of phones, but have included various categories, although he refused to specify a percentage for the increase, noting that determining an accurate percentage requires direct data from the manufacturing companies, given the sensitivity of the current situation.

He pointed out that local manufacturing of phones does not mean that all components of the device are manufactured within Egypt, as some essential components, including electronic boards, are still imported from abroad, while the percentage of locally manufactured components in some phones reaches about 40% or 45%. Al-Haddad stated that the upcoming meeting with manufacturing companies also aims to discuss the reasons for not hedging more against the rise in component prices or increasing quantities, amid ongoing pressures on the global component market, noting that the division will also discuss with consumer finance companies the reasons for some companies' delays in settling merchants' dues, despite collecting installments from customers, to explore ways to address this issue.

He added that Egypt has become a large and promising market for mobile phone manufacturing, especially with the expansion of investments and local manufacturing, as the goal of localizing the industry is not limited to meeting local market needs, but extends to exporting to African markets, providing foreign currency resources, and creating job opportunities. Al-Haddad noted that traders are facing increasing pressures due to changes in the prices of buying back phones, explaining that a trader may sell the device with a limited profit margin, then its price rises at the manufacturing company, forcing him to inject additional funds to purchase the same quantity again, which leads to the erosion of working capital.

He explained that the supply shortage represents an additional factor in the market, as some companies do not have sufficient production quantities coinciding with rising prices, which pressures sales movement, and with the continued price fluctuations, the consumer may find that the price of the phone has increased before he can gather the necessary amount to buy it, which leads to delaying the purchase decision. For his part, the head of the mobile division at the Cairo Chamber of Commerce, Mohamed Talaat, stated that phone prices in Egypt have risen by about 50% to 55% since the beginning of the year compared to last year, noting that increases are repeated every period ranging from 10 to 15 days, and are primarily related to the rise in phone component prices, especially memory and storage components RAM and ROM.

The prices of these components are affected by the increasing global demand, especially with the expansion of artificial intelligence and the growing needs of data centers and servers for memory and storage chips, which puts pressure on the availability of some components and raises the cost of acquiring them globally. Talaat stated in exclusive remarks to Afaq News in Arabic that memory and storage components are not manufactured in Egypt, but are imported from abroad, explaining that about 45% to 50% of mobile phone components are manufactured or assembled locally, while the remaining part comes from abroad. The rise in global component prices affects production costs, along with shipping costs and the exchange rate of the dollar, and thus changes in input costs affect the price of the device for the consumer.

He pointed out that locally assembled phones benefit from the exemption of customs duties on the components used in the assembly process, while the cost of fully imported phones is higher. He estimated the customs duties on imported phones at about 38.5%, noting that there is a gap between supply and demand for some mobile phone components, with limited availability of certain components, which affects production volume and the quantities available in the market. He said that these developments have reflected on sales movement, which has declined by about 20%, explaining that consumers have become inclined to repair their existing phones instead of buying new devices, whereas buying an additional phone for a family member was more common.