AI-Driven RAM Crisis Threatens Budget Smartphones as Memory Costs Double and Shipments Plummet

Cheaper Phones Will Be Harder to Find This Year and in 2027, Analysts Warn

Ever since being admittedly fascinated by the Cambridge coffee webcam from the 1990s, I've written about VPNs, the NFL, smartphones, living wages, over/unders and everything in between. Budget-conscious phone shoppers could be in for a struggle, and they have AI to thank for it. With memory costs continuing to rise, there could be 22% fewer phones under $400 on the market for the rest of this year and into 2027, according to a new report on Tuesday from technology research and advisory group Omdia. While premium phones such as the iPhone 17 Pro Max and Samsung Galaxy S26 Ultra, priced well above $1,000, continue to push the envelope of affordability, consumers with tighter wallets willing to forgo fancy features opt for cheaper phones. But if makers of these under-$400 devices are driven out the market, phone buyers with the least economic cushion could be hardest hit. Analyst Zaker Li said that for phones in that price range, memory manufacturing costs have nearly doubled between the third quarter of 2025 and the first quarter of 2026. For phones above $400, memory costs have increased by more than 100%, according to Omdia's Quarterly Smartphone Technology Trends report. Li said that some companies are trying to offset the increased memory expense by cutting costs on other components, such as screens, sensors and radio frequency modules, which aren't in short supply. But Li said there is not a lot of wiggle room to keep phones as cheap as they have been with the rapidly increasing cost of memory. As Chinese phone-makers such as Oppo, Vivo, Honor, Xiaomi and Transsion are forced to raise phone prices, cost-conscious consumers will stop buying them, Li said. As demand continues to decline due to higher prices, companies could stop producing low-end phones, Li predicts. The gloomy analysis jibes with what CNET mobile managing editor David Lumb learned at Mobile World Congress in Barcelona in March: The rapid building out of AI infrastructure is using up memory, with a lot of RAM needed to power AI systems. It's caused a global RAM shortage that is leading to higher prices for phones, and also the possibility that companies won't make cheaper phones, since it won't be worth it. "Some vendors are telling us that they are considering leaving that [budget] segment entirely, because if you sell a phone for $150, and half the cost is memory, where will you make money? There's no point in selling products, right?" Francisco Jeronimo, vice president for Worldwide Client Devices at IDC, told Lumb at MWC. Whereas AI needs a lot of RAM for its countless processes, phones use it for storage and to keep multiple apps open at the same time. The outlook for low-budget phones In the short term, Omdia says the global phone market will drop 12% this year compared to 2025, because of the predicted 22% decrease in shipments of phones costing less than $400. Long term, the prospects are brighter. IDC's Francisco Jeronimo told CNET in March that the RAM crisis should be resolved by the fall of 2027 or early 2028. The AI infrastructure build-out will slow down, and more RAM will be produced. In the meantime, consumers will stick with their current phones and avoid paying higher prices for upgrades, Forrester VP and principal analyst Dipanjan Chatterjee told Lumb. To counter that, companies will have to attract people to other non-phone products or add more features to phones to convince folks to buy them. For those willing to pony up a bit more for a new device, Omdia says shipments of phones costing more than $400 will grow by 5.7% this year, which would match previous patterns: Even in times of economic distress, premium phones such as the iPhone 17 Pro Max and Galaxy S26 Ultra continue to sell, as their customers are more insulated from financial shocks. As a result of this RAM crisis, phone-makers are focusing more on higher-end devices, and a large percentage of consumers don't mind spending that much, Omdia said. The memory-per-device cost percentage also drops significantly with higher-priced phones, analyst Li said.

AI just shrank the PC market and is killing cheap phones

The global PC market shrank for the first time in two years, and the cheapest smartphones are vanishing fast. Both come down to one thing: AI's hunger for memory chips is draining supply and pushing up the price of nearly everything you buy. For the first time in two years, the world bought fewer PCs. Global shipments of desktops, notebooks, and workstations fell 3.6% in the second quarter of 2026, to 65.7 million units, according to the analyst firm Omdia. The cause is not weak demand. It is the price of memory, and the reason it is soaring leads straight back to AI. The AI boom has a voracious appetite for memory chips. Data centres are buying up DRAM and NAND to feed their servers, and that has drained supply for everything else. Prices have jumped, and device makers are passing the cost on. The gadgets in your pocket and on your desk are the collateral damage. The first PC decline in two years Desktops held up better, slipping 1.3% to 13.9 million units. Notebooks took the hit, down 4.2% to 51.7 million. Across comparable models, Omdia says prices have risen by roughly 20% to 40% against a year ago. Oddly, sales did not crater. Many buyers simply moved fast. Facing warnings of further rises, shoppers and IT departments brought their purchases forward to beat the next hike. That props up the numbers now, but it borrows from the future. More than half of the business resellers Omdia polled in June said customers are delaying hardware refreshes until prices settle. Rival tracker IDC put the drop a little steeper, at 4.9%, but the story is the same. Both firms agree the market is shrinking, and that the squeeze has further to run. Winners and losers The pain was not shared evenly. Lenovo kept the top spot with 16.6 million units and a 25% share, down a modest 2.1%. HP fell hardest of the leaders, down 9%, while Dell slipped 4.9%. One name went the other way. Apple grew shipments 15.9%, to 7.3 million units, and added two points of market share. The lift came from its new MacBook Neo, and it came despite price rises, not instead of them. Apple raised MacBook prices this year, some models by up to $300, and buyers still came. Asus rounded out the top five, roughly flat. The cheap phone is the real casualty PCs are only half the story. The bigger blow is landing on the cheapest smartphones. Omdia expects global shipments of phones priced under $400 to fall more than 22% this year. The maths is brutal at the low end. In the first quarter, memory alone made up nearly 60% of the bill of materials for a sub-$400 phone, and more than 64% for phones under $99. A premium maker can swap in an older chip or a cheaper screen to absorb the cost. A budget maker has already cut everything it can. So brands like Transsion, OPPO, vivo, Honor, and Xiaomi are raising prices or quietly retreating from the bottom of the market. As TNW has reported, AI is killing the cheap smartphone. Pricier phones are faring better. Omdia expects shipments above $400 to grow 5.7% this year, even as the overall phone market shrinks by around 12%. The industry is drifting upmarket, because that is where the margin is. Why your gadgets got pricey The knock-on effects are everywhere. Apple has raised prices on Macs and iPads by as much as $300. Microsoft has pushed Xbox prices up repeatedly, blaming memory and storage costs it says have more than doubled. Valve launched its Steam Machine at a steep $1,049. The boss of Currys, Britain's biggest electronics chain, has warned shoppers to expect dearer phones and laptops later this year. The crunch is even reaching into the past. Prices for DDR2, a memory standard from 2003, have jumped as makers scramble for any supply they can find. When a 23-year-old chip gets more expensive, you know the shortage is real. Why it matters This is the paradox of the AI hardware boom. The same wave that is meant to make our devices smarter is, for now, making them costlier and scarcer. Memory and storage prices are not expected to reverse this year, and other parts, from capacitors to circuit boards, are climbing too. IDC does not expect the shortage to ease until early 2028, and Nvidia's Jensen Huang has said the crisis will last "quite a few years." There is one possible release valve. Chinese memory makers are ramping up, which could ease prices in time. Until then, the advice from the analysts is blunt. If you were putting off a new laptop or phone, waiting may cost you more, not less.

Thanks, AI companies: Sub-$400 phones could see a huge decline due to RAM crisis

The rising memory costs can be largely attributed to AI companies shoring up High-Bandwidth Memory for their data centers. It's no secret that there's an industry-wide RAM crisis at the moment, leading to exorbitant price increases across multiple product categories. We already know the situation looks bleak for $500 midrange phones in the near future, and new research is predicting a similar fate for sub-$400 smartphones. Research published by Omdia shows that memory costs for sub-$400 phones in Q1 2026 accounted for 59% of the total BOM (bill-of-materials) cost, as shown in the graph below. By comparison, device memory accounted for only 32% of the total component costs in Q3 2025. The graph shows that cheaper smartphones are taking a bigger hit due to rising RAM costs, while more expensive phones are absorbing some of that impact better, though they aren't immune to the issue either. While RAM costs are significant for phones priced in the sub-$400 segment, they account for 64% of the cost among sub-$100 phones. Omdia's forecast in May predicted that the global smartphone market will fall 12% year-over-year in 2026. The expected 22% decline in shipments of sub-$400 phones may play a big role in this scenario. With RAM costs eating into already slim profit margins, manufacturers could move away from the sub-$400 segment in 2026 and focus on more premium smartphones. So it's not particularly surprising that shipments of phones priced over $500 are predicted to grow by 5.7% this year. We've also recently learned how Samsung's decision to phase out older RAM may adversely impact several midrange and budget smartphones. For people who are in the market for a sub-$400 smartphone this year, there's a high likelihood you'll end up paying significantly more than you would have in 2025 for a similar device. With this in mind, it makes a lot of sense to get a last-gen smartphone in 2026.

Budget smartphones are getting squeezed, and AI is one reason why

Analysts warn shipments of phones under $400 could drop by more than 22% this year. For years, smartphone buyers have had it pretty good. Even budget phones now offer fast processors, high-refresh-rate displays, and cameras that would've seemed flagship-worthy just a few years ago. But that trend may be about to slow down, and AI is playing a big role. According to a new report from Omdia, global shipments of smartphones priced below $400 are expected to decline by more than 22% in 2026, largely because the cost of DRAM and NAND memory continues to rise. As AI features demand more memory across the industry, manufacturers are finding it increasingly difficult to build capable budget phones without sacrificing their already razor-thin margins. Why has memory suddenly become so expensive Memory has always been one of the highest costs inside a smartphone, but Omdia says it's becoming an even bigger burden. In the first quarter of 2026, memory alone accounted for nearly 60% of the bill of materials in smartphones priced below $400, rising to more than 64% for phones costing under $99. That's left manufacturers with very little room to absorb further price increases. Brands have already tried trimming costs elsewhere by using cheaper display panels, camera sensors, and radio components, but Omdia says low-end smartphones are already so tightly optimized that there simply isn't much left to cut. As a result, companies like Transsion, OPPO, vivo, Honor, and Xiaomi are increasingly being forced to either raise prices or reduce specifications just to protect their margins. Premium phones aren't facing the same problem Interestingly, Omdia says this pressure is mostly limited to the budget segment. While shipments of phones under $400 are forecast to fall by more than 22%, smartphones priced above $400 are expected to grow by 5.7% this year. Premium devices simply offer manufacturers far more flexibility to offset higher memory costs by tweaking displays, cameras, or even using older chipsets where it makes sense. The funny thing is that AI was supposed to make smartphones more capable. Instead, it may also make them more expensive, or at least make truly affordable phones much harder to build. If Omdia's forecast proves accurate, the next generation of budget smartphones may end up offering fewer upgrades than we're used to, or disappear altogether as brands shift their focus toward more profitable devices.

The AI phone era is coming, and the weird brands may not survive it

The market once had room for strange, scrappy, genuinely good phones. AI could turn that room into another luxury suite. I have a soft spot for phone brands that made Android feel less inevitable. Meizu is one example, but there were plenty of smaller names with their own strange little gravity, from Fairphone's repair-first stubbornness to Unihertz's tiny oddballs, Shiftphone's modular ideals, Murena's de-Googled pitch, and Teracube's attempt to make phone ownership feel less disposable. They weren't always perfect, and some were never built to go mainstream, but they made smartphones feel alive around the edges. Now the AI phone push is arriving, and it already looks less like a creative explosion than a cover charge. Meizu said in 2024 that it would end new traditional smartphone projects and focus on AI-enabled devices, which sounds futuristic until it starts feeling like a warning label. The rich end gets to define the future Apple doesn't need to own the entire phone industry to bend it toward Cupertino. WSJ notes that Apple represents about one in five of the roughly 1.3 billion smartphones shipped last year, which puts it near Samsung and Xiaomi on raw volume. The real control starts higher up the price ladder. In phones priced at $600 or more, Apple controls more than two-thirds of the segment. At $1,000 or more, it takes more than three-quarters. That would already make the high-end segment lopsided, but it looks harsher when overall smartphone shipments are forecast to fall while premium phones are still expected to grow. Recommended Videos The safest money is gathering around the richest buyers, the strongest ecosystems, and the companies that can raise prices without setting their customer base on fire. AI raises the cover charge AI makes that imbalance harder to ignore because it raises the price of being taken seriously. A smaller phone brand can still buy a decent panel, tune a respectable camera, ship a fast charger, and build something with more personality than another glass rectangle wearing a camera island like a backpack. The next round asks for more. AI phones need newer chips, more memory, cloud infrastructure, model partnerships, longer software support, and a marketing budget big enough to sell people on the assistant they ignored last year. Counterpoint expects GenAI-capable phones to reach 45% of global shipments in 2026, up from 36% in 2025, which makes AI feel less like a bonus feature and more like the next entry fee. The squeeze isn't only happening in software. Reuters reported that IDC expects the smartphone market to see its biggest-ever decline in 2026, partly because AI infrastructure demand is helping drive up memory costs. Low-end Android makers are expected to take the hardest hit, while premium brands are better positioned to absorb the shock or pass it along. The weird brands are running out of room Some smaller phone brands were niche for good reasons. Some made genuinely bad software. Some treated updates like seasonal gossip. The useful ones still kept Android from feeling pre-chewed. The Android world was already watching Oppo, Realme, Vivo, and OnePlus blur into each other before AI became the new seriousness test. Meizu isn't the whole story, but it's a painfully tidy example. A brand that once helped make Android feel less uniform now has to explain its future through AI roadmaps and ecosystem language, because that's where the industry has decided seriousness lives. That's the part I don't want to lose in this next phone cycle. Odd little brands shouldn't have to beat Apple to justify existing. Sometimes the useful thing is simply having a phone industry where good, strange devices can hang around long enough to make the giants look a little less inevitable. AI is being sold as the thing that will make phones more personal. The bleak joke is that the companies most likely to survive the shift are the ones large enough to make every phone feel a little more the same.

AI smartphones enter a pricier phase: smaller brands squeezed

Analysts think AI phones will make up 45% of global smartphone shipments in 2026, up from 36% in 2025, as on-device assistants, image tools, and context-aware software become standard features. Getting to that point, though, takes newer chips, more memory, stronger neural hardware, cloud infrastructure, model partners, longer support windows, and bigger marketing budgets, which raises the cost of entry quite a bit for smaller brands. IDC is also forecasting the smartphone market's steepest drop ever in 2026. Server demand is pushing memory prices up, which hits low-end Android brands harder, while Apple, Samsung, and Google can fall back on premium buyers and sheer scale; IDC says Apple shipped about one-fifth of the 1.3 billion phones sold last year and holds more than two-thirds of the market above $600, plus more than three-quarters above $1,000. If you care about repairable, modular, privacy-focused, or just plain unusual phones, keep an eye on this. Brands like Meizu are already changing position, budgets are shifting away from experimentation and toward processors, memory, and ecosystems, and surveys still show that performance and battery life matter to buyers more than AI phone features do. The first big push will show up on premium phones, where smarter editing, translation, summaries, and proactive suggestions are already starting to roll out.