BT Group has warned that the AI boom driving Silicon Valley could soon make smartphones more expensive as worsening chip shortages spread into consumer electronics.
Speaking after the company’s annual results on Thursday, BT chief executive Allison Kirkby said huge demand for chips powering artificial intelligence infrastructure is beginning to squeeze supply across the wider tech industry, with premium handset makers likely to pass rising costs directly on to consumers.
For households already juggling higher rent, food prices and monthly subscriptions, that could mean the next phone upgrade becomes noticeably harder to afford at a time when many consumers are already stretching devices for longer before replacing them.
Kirkby said companies building AI data centres are consuming enormous volumes of memory chips as the race to expand artificial intelligence accelerates, and that competition is now spilling into other parts of the technology market, including smartphones and laptops.
“I would expect the premium handset manufacturers will try to pass it on to their customers — that’s what they normally do,” Kirkby said.
Analysts already expect Apple to increase prices on future iPhone models, while other flagship smartphone makers are also dealing with rising hardware costs tied to tighter semiconductor supply. Most people probably do not think about AI when they pay their phone bill, but the financial effects are beginning to appear in everyday costs as the technology arms race reshapes global supply chains.
Many households are already keeping phones longer because replacing devices has become harder to justify financially, particularly as monthly handset repayments continue rising alongside broader living costs. Even relatively small increases can push premium devices further out of reach for consumers already cutting back on discretionary spending.
BT sells mobile phones through its EE business, putting the company directly in the middle of a consumer market where affordability matters more than ever. Consumers may ultimately end up paying for the AI race long before they see any meaningful benefit from it themselves.
The warning came alongside a broader restructuring push inside BT, with the telecoms giant expanding cost-cutting targets from £3 billion in savings by 2029 to £3.7 billion by 2030 as it looks for additional efficiencies, including opportunities linked to AI.
BT also confirmed it remains on track to dramatically reduce its workforce over the decade, with headcount expected to fall from around 130,000 employees in 2023 to roughly 75,000 by 2030 as automation and operational streamlining continue across the business.
BT’s warning reflects a growing race among major companies trying to fund expensive AI investment while still keeping investors satisfied through lower costs, automation and stronger cash flow. Investors are continuing to reward companies that promise greater efficiency and better returns even as infrastructure spending linked to AI keeps rising sharply.
The company also revealed it lost 825,000 customers across its Openreach broadband network during the year as cheaper rivals continued targeting families watching spending closely with aggressive deals. Although the losses were slightly better than analysts expected, they still underline the brutal price competition across broadband and mobile markets during the cost-of-living squeeze.
At the same time, BT is trying to convince investors its recovery plan is working. The company maintained its financial guidance, increased its dividend and said it still expects to significantly boost free cash flow before the end of the decade. BT shares have more than doubled since Kirkby took over despite continued concerns around telecom growth, infrastructure spending and competition from cheaper broadband challengers.
For consumers, however, the picture looks very different. The AI spending boom is now hitting ordinary household budgets in visible ways, with more expensive devices, longer upgrade cycles and rising monthly costs becoming some of the first financial effects many people experience from the technology race while households are still waiting to feel any real financial upside from it.
