As artificial intelligence transforms data center needs, memory chip makers are diverting supply from smartphones to AI hardware, causing a sharp increase in memory costs and a collapse in the sub-$100 smartphone market globally.
- LPDDR memory prices surged over 200% amid AI-driven demand.
- Sub-$100 smartphone sales collapsed 59% in India and over 20% in Africa.
- Three main memory makers prioritized AI chips over consumer devices.
What happened
Leading DRAM manufacturers Samsung, SK Hynix, and Micron have redirected a significant portion of their production capacity from smartphones to AI chips, particularly high-bandwidth memory (HBM), which requires substantially more wafer space per gigabyte than standard memory. This strategic reallocation has resulted in dramatic price increases for memory components used in budget smartphones, with some prices climbing over 400% in key markets.
As a consequence, the supply of affordable smartphones is tightening rapidly. Device makers specializing in low-cost phones, such as Transsion, Oppo, and Vivo, are experiencing steep profit declines and have sharply cut shipment targets. The dwindling supply has caused sub-$100 smartphone sales to plummet, most notably a 59% drop in India and a 20%+ decline in Africa and the Middle East.
Why it matters
The rise of AI has created a fundamental market shift in semiconductor manufacturing that prioritizes high-margin, high-performance memory for data centers over memory for consumer electronics. This change disrupts decades of smartphone affordability gains that helped connect hundreds of millions of low-income users to the internet.
For many consumers in emerging regions, the loss of ultra-cheap smartphones means reduced access to essential digital services, hampering economic and social inclusion. The structural reset leaves an increasing share of the world’s population priced out of smartphone ownership, reversing a long-standing global trend toward wider digital accessibility.
What to watch next
Industry observers will be closely monitoring whether memory manufacturers expand total production capacity or continue capacity discipline that favors AI demands, as this will directly affect smartphone affordability going forward. The balance they strike will influence the trajectory of global smartphone shipments and access.
Additionally, smartphone makers may pursue innovation in device design, chipset efficiency, or alternative memory technologies to mitigate cost pressures. Policymakers and market players in regions heavily impacted by the collapse of sub-$100 phones might also explore incentives, subsidies, or regional manufacturing solutions to sustain affordable mobile connectivity.