Phone and laptop prices on the rise, Currys chief warns

There is a familiar rhythm to the consumer electronics business: a new generation of devices arrives with promises of speed, clarity and convenience, and within months the price becomes the real story. Alex Baldock, departing after eight years as chief executive of Currys, believes that story is about to turn harsher. He expects the cost of mobile phones and laptops to rise later this year, not because retailers have suddenly rediscovered pricing power, but because the world’s chip supply is being pulled towards a different buyer with deeper pockets and fewer compromises: the data centre.

Baldock’s diagnosis is blunt. Artificial intelligence systems, and the servers that train and run them, are consuming global capacity not only for advanced processors but also for the memory chips that make modern computing usable at speed. As those buyers sign long contracts and pay premiums for secure supply, the leftovers for mainstream electronics are diminished. For households, the effect will be less glamorous than the rhetoric that accompanies AI. It will be seen at the till, where a routine upgrade to a laptop for a teenager’s coursework or a replacement phone will feel, once again, like a discretionary purchase that has become uncomfortably close to a luxury.

What makes the warning notable is not that a retailer expects inflation to reappear in a category that has long relied on discounting. It is that the current pressure is structural. The chip industry has always cycled between shortage and glut, yet this time the demand shock is being driven by an investment boom whose beneficiaries are not the same as its payers. The corporations building vast computing estates, and the investors funding them, regard chips as strategic assets, as vital as land or energy. The average consumer buying a laptop does not. In the contest for supply, it is difficult to see who wins if the market is left to decide on price alone.

Apple has offered a glimpse of how quickly this can filter through. The company raised prices on iPads and Macs by about a fifth worldwide, saying it could no longer absorb the rising cost of memory chips. When a business of Apple’s scale describes the situation as an “unprecedented challenge” and says it has “never seen component prices increase this much, this quickly”, it is a signal to the rest of the sector that the easy options have been exhausted. Analysts expect the iPhone to be next, and a price increase in the world’s best-known consumer device has a habit of resetting expectations across the market.

The figures being cited in the supply chain are stark. TrendForce has forecast that prices for DRAM chips used in consumer electronics will jump 60 per cent in the current quarter. Such moves rarely remain confined to trade briefings. They find their way into product pricing, into the promotional calendars of retailers, and ultimately into the decisions households make about what can be delayed. The shorthand “RAMageddon”, used by some observers to describe the memory shortage, may be glib, but it captures the reality that something as mundane as memory now sits at the centre of a global competition between consumer convenience and industrial-scale computing ambition.

Others have already begun to pass costs on. Sony and Nintendo have announced price increases in recent months. Taiwan Semiconductor Manufacturing Company, the world’s largest chipmaker, has cited inflationary pressures pushing up costs. Each of these announcements reads as a local decision, a tweak to a price list. Taken together, they suggest a market repricing of computing itself. For two decades the story of electronics has been that more capability could be delivered for the same money, or less. The danger, from the consumer’s point of view, is that the AI era reverses that bargain, at least for a period, making personal technology more expensive while much of the new value accrues elsewhere.

Currys sits at an awkward intersection of these forces. It is exposed to the cost of devices, but it also has the scale to negotiate and the customer relationships to shape demand. Baldock says the company is using its “heft” as Britain’s market leader to secure supply and keep prices lower for as long as it can. Currys has bought forward inventory, and he says it has good security of supply in computing and mobile phones until September. That is a pragmatic admission that protection is temporary. It also hints at how the next phase of price rises may unfold, with some product lines holding steady until contracted stock is sold through, followed by a sudden step up as new shipments land at higher costs.

The consumer impact is likely to be uneven. Premium brands can absorb a measure of inflation through price positioning and loyal buyers. Mid-market devices, sold on value, have less room to manoeuvre. Retailers will try to keep entry prices attractive through smaller storage options, fewer bundled accessories and shorter promotional periods. There is also the quiet squeeze of services: finance packages, warranty plans and subscriptions become more prominent as sticker prices rise. For many customers, the choice will not be between two laptops, but between replacing a laptop at all and making do for another year.

Baldock’s warning comes with a certain symmetry, because he leaves Currys at a moment when the company can plausibly claim to have become more resilient. The retailer reported that annual profit before tax increased 18 per cent to £191 million, narrowly ahead of a company-compiled consensus of £188 million. It doubled its full-year dividend to 3p and announced a £50 million share buyback, a return of capital that would have sounded fanciful in the more anxious chapters of its recent history. The numbers suggest a business that has regained control of its balance sheet and is confident enough to reward shareholders while still investing in operations.

This matters because Currys is not a growth story in the fashionable sense. It is a high-volume retailer with thin margins, competing against online giants and discount specialists, and operating in a country where household budgets have been repeatedly squeezed. Its success is measured less by dramatic expansion than by the unglamorous disciplines of stock management, customer service and cost control. When it is able to increase profits in such an environment, it implies that it has found a workable model for modern retail: a blend of stores that still serve as showrooms and service hubs, and online operations that meet customers where they now prefer to transact.

Baldock’s tenure has been defined by that shift. When he arrived in 2018, the group, then still carrying the legacy identity of Dixons Carphone, was widely viewed as a business with too many problems and too little time. Profits were collapsing, the Carphone Warehouse business was struggling, and the market was convinced that Amazon and other online players would steadily drain away demand. Baldock has repeatedly returned to the line that Amazon thought it would “eat us for lunch”. Whether or not that was ever the full plan, it captured the mood of the era: that a big box electronics retailer had few defences left.

The recovery has been achieved by doing less, and doing it better. Currys withdrew from underperforming areas, sold off struggling operations including its Greek business, and exited Carphone Warehouse as a standalone proposition. It focused on categories where it could credibly be the default choice for consumers and where advice, delivery and installation could justify a physical presence. Just as importantly, it invested heavily in online. Under Baldock, online sales have grown from less than 10 per cent of turnover to more than 40 per cent. That shift is not merely a change of channel; it is a change of economics, because it alters the relationship between stores, logistics, pricing and service.

Financially, the latest results show a business that is back to sustainable growth, at least on its own terms. In the 12 months to May 2, annual revenue rose 4 per cent on a like-for-like basis to £9.3 billion. UK and Ireland sales increased 3 per cent to £5.4 billion, and the Nordics, which account for about 40 per cent of sales, continued their recovery with like-for-like growth of 6 per cent and revenue of £3.8 billion. These regional figures matter because they show a group that is not relying on a single market for momentum and because the Nordics, once a drag, now look closer to an asset.

The UK numbers also come with a reminder of the operating pressures on retailers. Currys absorbed a £32 million cost hit from increases to national insurance and the minimum wage. In other circumstances such costs might have forced immediate price rises or store closures. Currys has, instead, maintained profitability, which suggests that the company has built a degree of efficiency and that its scale gives it negotiating power with suppliers and landlords. That does not mean the pressure disappears. It means the business is better placed to cope, for now, with policy-driven cost increases that affect the entire sector.

Investors have become more willing to credit the turnaround. Shares fell nearly 11 per cent when Baldock’s exit was announced in March, an expression of how strongly the market associated performance with his leadership. Over the past year, however, the share price has risen by about a third, and the company upgraded its profit guidance last month despite concerns that conflict in the Middle East would constrain household spending. Baldock’s comment that he is not counting on the outside world to do the business any favours is a useful description of retail realism. A good year in this sector is often one in which the company survives multiple external shocks without losing momentum.

Recent trading details underline how sensitive electronics retail remains to events and weather. A pick-up in television sales was driven by the World Cup, with sales of supersized TVs of more than 90 inches more than trebling. Wearables, including Garmin watches and Meta glasses, performed strongly. Bean-to-cup coffee machines also sold well, a small but telling sign of the consumer mood: when households feel the squeeze, they look for affordable substitutes for everyday indulgences, replacing the coffee shop habit with an appliance that pays for itself over time. During last month’s record-breaking heatwave, there was a surge in demand for fans and air-conditioning units, and Baldock said stock levels were “pretty tight” heading into the peak of summer.

These details reveal a retailer that now lives by responsiveness. The high street model of the past assumed footfall and planned ranges. The modern model assumes bursts of demand, shaped by sport, social media, weather and product cycles, and it rewards businesses that can move stock quickly through multiple channels. That is why supply matters so much. If chip constraints restrict the flow of laptops and phones, retailers can sometimes compensate with adjacent categories, but they cannot easily replace the margin and the customer traffic that the core devices generate. A shortage in computing is not like a shortage in a novelty accessory; it affects the heart of the offer.

In that sense, the AI-driven chip squeeze is not merely a story about higher prices. It is a story about the changing hierarchy of industries. For years, consumer electronics helped set the pace for semiconductor development: smartphones and laptops provided the scale that justified new manufacturing techniques. Now the gravitational centre is shifting towards industrial computing, with data centres dictating priorities. The result is a market where the consumer, once the main event, becomes one segment among many, competing for capacity with corporate customers who regard delay as existential and budgets as flexible.

Currys will try to use its position to cushion customers, but there are limits. Baldock has indicated he can dampen the rise, not prevent it. Retailers can negotiate, shift ranges, adjust promotional intensity and lean on services, but they cannot rewrite global supply. Nor can they escape the risk that price rises hit demand at the same time as households remain wary about discretionary spending. Even if inflation has cooled in other parts of the economy, the psychological memory of recent price shocks remains, and consumers are quicker than they used to be to delay upgrades.

Baldock’s departure adds a corporate narrative to a market one. He is set to become chief executive of Boots, another British retailer facing its own mix of cost pressures, consumer caution and competitive disruption. His successor at Currys will be Fredrik Tonnesen, head of the Nordic division and a former Currys sales assistant, a choice that signals continuity and a preference for an operator who understands the shop floor as well as the boardroom. Analysts at Berenberg have described Currys’ balance sheet as the healthiest in more than a decade, and said trading this year to date had been very solid. The company expects £198 million in annual pre-tax profit and £9.6 billion in revenue for the next financial year, in line with guidance, with total cash returns to shareholders of about £85 million.

Those projections are encouraging, yet they rest on assumptions about supply, pricing and demand that may prove fragile. If component costs rise sharply and remain high, the industry may face a prolonged period in which volume slows and consumers trade down. That would test the strategy of moving into adjacent areas, such as serving small and medium-sized businesses, and expanding newer categories, because diversification is easiest when the core is stable. Baldock has argued that Currys has returned to sustainable top-line growth without help from the market. The next phase may show whether that resilience holds when the market becomes actively unhelpful.

For consumers, the immediate question is simpler: how much more will the next device cost, and when. Baldock has not offered a number, but his timing, later this year, aligns with the point at which Currys’ forward-bought supply runs out. If the higher prices arrive, they will land in a country where technology is no longer optional for work, school or basic administration. A rise in laptop prices is not like a rise in televisions. It affects access, productivity and, for many families, the hidden costs of modern life. The irony of the AI boom is that it promises to make the world more efficient, while at the same time making the tools ordinary people rely on a little harder to afford.