Memory shortage drives smartphone market to worst slump in 13 years as AI demand reshapes industry

AI-driven memory crunch jolts India's smartphone market

Months after analysts warned that AI-driven demand for memory chips would ripple through consumer electronics, India is providing the strongest evidence yet that the disruption has arrived, with rising handset prices reshaping the smartphone market. The memory chips in question -- RAM and storage components -- are the same ones tech giants need by the truckload to build AI data centers. Manufacturers like Samsung, SK Hynix, and Micron have been shifting production capacity toward high-bandwidth memory, the specialized chips used in AI accelerators, because they're much more profitable per wafer than the standard memory used in phones and laptops -- leaving less capacity, and driving up costs, for everyday consumer electronics. India, the world's second-largest smartphone market by shipments after China, saw smartphone shipments fall 10% year-over-year in the April-June quarter, according to market research firm Counterpoint Research, marking the steepest June-quarter decline in six years as higher memory costs pushed up handset prices. The impact has been more pronounced in India than in China, where smartphone shipments fell just 2% in Q2, according to Counterpoint. India has been hit harder because about 60% of its smartphone market is concentrated in the sub-₹20,000 (under $210) segment, where higher memory costs have had the biggest impact on prices, Tarun Pathak, the firm's vice president of research, told TechCrunch. India has been a prominent market for global smartphone brands for several years. The South Asian nation, home to more than 1.4 billion people and over 700 million smartphone users, has become a bellwether for consumer demand in price-sensitive markets, making shifts in buying patterns closely watched by device makers, chip suppliers, and investors tracking the broader health of the AI supply chain. Pathak told TechCrunch that consumers are unlikely to abandon smartphones altogether. However, many of them are expected to delay upgrades, stretching replacement cycles to around four years from about 3.5 years previously, while premium brands such as Apple and Samsung remain better insulated from the slowdown. The uneven impact is already reshaping competition among smartphone makers. Samsung was the only major smartphone brand to post shipment growth in India in Q2, with volumes rising 2% year-over-year, according to Counterpoint. Apple, by contrast, saw shipments fall 3% -- though that dip largely reflected supply constraints and inventory shortages limiting how many iPhones Apple could deliver. Consumers buying higher-end smartphones have proved less sensitive to price increases, with financing making expensive devices more affordable, Prachir Singh, a senior analyst at Counterpoint Research, told TechCrunch. The pain has been most acute at the lower end of the market. Shipments in the sub-₹15,000 (under $150) segment fell 45% from a year earlier, Counterpoint said. Because Chinese brands are heavily exposed to entry- and mid-tier smartphones, their combined market share fell to its lowest level for a second calendar quarter since 2020. The tougher economics are also prompting strategic shifts. This week, Chinese smartphone brand OnePlus said it would stop launching new products in Europe and North America, while maintaining its India business, following what it described as a careful assessment. Counterpoint data shared with TechCrunch showed China accounted for 74% of OnePlus' global smartphone shipments to distributors and retailers in Q1, up from 59% a year earlier, while India's share fell to 19% from 30%. In other words, OnePlus is retreating to markets where it can still turn a profit and ceding ground elsewhere -- a pattern likely to repeat across other budget-focused brands as margins tighten. Indeed, Pathak told TechCrunch that running several sub-brands only makes sense if each one sells enough volume to cover shared costs, and that math stops working once margins get this thin. "Sub-brands normally have overlaps and shared resources, and you need a minimum base to justify the cut-throat margins. Profitability is the key to deciding market operations," he said. Consumers feel the squeeze That pressure on brands is trickling straight down to the people buying their phones. Kiranjeet Kaur, associate research director for mobile phones research at IDC, said the Indian smartphone market is shifting from volume-led growth to value growth -- meaning fewer phones are being sold overall, but each one generates more revenue -- as higher component costs make lower-priced smartphones increasingly uneconomical. The higher component costs are already filtering through to consumers. Smartphone prices in India have risen by between 4% and 68%, depending on the model, Pathak said, and as prices rise, consumers are either moving to higher-priced devices, delaying upgrades, or turning to the secondhand market. Financing has meanwhile become "central to affordability," Kaur told TechCrunch. She added that brands and retailers were also building inventory ahead of the festive season to lock in lower costs before further increases in component prices. IDC also expects India's smartphone shipments to decline by double digits in Q2, a steeper fall than the 4.1% decline in the first quarter and the 5.3% drop in the previous quarter, Kaur said. However, she noted the firm's estimates were not yet finalized. Kaur told TechCrunch that memory shortages and elevated smartphone prices were likely to persist until at least the end of 2027, although the pace of price increases should moderate as consumers gradually adjust to higher prices becoming the new normal. "For Indian consumers, it is a double whammy as the weaker currency makes imports costlier, which has added to margin pressures for the market players, and they are passing on the cost to the consumer," Kaur said.

The Memory Shortage Is So Bad That Smartphone Shipments Hit a Record Low

Global smartphone shipments fell 11% in the second quarter of this year, marking the lowest level since 2013, according to estimates from Counterpoint Research. To blame are soaring smartphone prices, driven incrementally higher as a global memory chip shortage worsens. "The global memory crisis has now overtaken every other factor as the single biggest drag on the smartphone industry," Counterpoint Research senior analyst Shilpi Jain said in the release. The AI boom and the unprecedented data center buildout have skyrocketed demand for high-bandwidth memory chips. With the trillions of dollars flowing into scaling AI globally, the top chipmakers have shifted their focus almost entirely to address the AI industry's chip demand, albeit at the expense of consumer electronics manufacturers. With finite chipmaking capacity, consumer-level memory supply has dragged, causing delays and price hikes that have been undeniably passed on to consumers looking to buy gadgets that also rely on these memory chips, such as computers and smartphones. But the impact is not dealt equally. Demand for smartphones from Samsung and Apple in the second quarter was still pretty resilient, Counterpoint claims, with both phonemakers experiencing growth. Driven by the flagship Galaxy S26 series and fewer price hikes than some competitors, Samsung experienced the strongest growth in shipments. Meanwhile, Apple's market share rose to a record 20%, probably thanks to its position as the only major smartphone manufacturer that has largely avoided price hikes. But that reality is looking likely to change with the upcoming iPhone 18, which recent reports claim could be priced at least $200 higher than the iPhone 17 Pro. Apple CEO Tim Cook also told the Wall Street Journal last month that the memory chip shortage had become "unsustainable," making price hikes for Apple products simply "unavoidable." "This is a hundred-year flood," Cook told the WSJ. "I've never seen anything like it in any area in over 40 years." Instead of Samsung and Apple, the brunt of the decline in shipments was faced by smartphone makers that appeal to a more budget-conscious consumer, such as China's Xiaomi and Oppo. Entry and mid-tier smartphones, which are priced considerably lower than the iPhone, experienced major price hikes because production became "structurally unfeasible at previous price points," Jain said. Analysts foresee the memory crisis continuing into next year and beyond, with some experts even seeing the shortage and the accompanying price hikes bleeding into the next decade. Top memory chipmaker SK Hynix's CEO Kwak Noh-Jung told Reuters last week that he expects 2027 to be the worst year yet for the memory shortage. "We forecast that next year will be the worst year in the industry's history from the supply perspective," Kwak told Reuters. "We still forecast that customer demand will remain higher than our supply capacity even beyond 2030." The Counterpoint report's view is also pessimistic. As the shortage continues into next year, the researchers expect shipments to be down around 14% for the full year 2026. "Overall demand recovery is unlikely until memory supply conditions improve substantially," the company said. If AI hype and soaring financial commitments continue as is, that improvement in conditions is unlikely to happen any time soon.

The smartphone market just hit its worst slump in 13 years, and your next phone will cost more

Sara Heritage is a tech and gaming journalist, who's currently making her way up to Master Ball rank in Pokemon Champions. Bylines in IGN, GAMINGbible, The Gamer and more. You can usually find her tinkering with tech, or restoring old consoles, always with one of her 3 cats nearby. Come and talk with her over on Twitter @SHeritageJourno. * Smartphone shipments fell 11% in Q2 2026, the steepest slump since 2013. * AI-driven memory demand raised DRAM/NAND prices, hitting budget phones and raising entry-level costs over 50%. * Apple and Samsung gained share; buy refurbished for deals, but check battery, factory reset and warranty. The smartphone market just hit its biggest slump in over ten years, according to Semafor. Shipments dropped 11% in Q2 2026, the lowest since 2013. It's not just people buying fewer phones -- there's a global memory shortage making things worse. Ultimately, it means that next year you might have to pay more for an entry-level phone, for far less power. So, what's causing all this? It's mainly thanks to AI Memory makers like Samsung and Micron are now focused on producing high-end chips for AI data centres rather than standard phone parts. AI chips make more money, so memory suppliers are giving phones the cold shoulder. Prices for DRAM and NAND flash (the stuff inside every phone) have shot up. For cheaper phones, memory can account for up to 60%% of the cost, so when prices rise, these phones either get more expensive or just aren't worth making. Entry-level phones now cost over 50% more than they did last year, so many people are priced out. PC builders aren't happy either -- memory kits that were $100 are now closer to $350, and good luck finding them in stock. This hit budget phone makers like Xiaxomi and OPPO the hardest. Their shipments dropped fast because they had to raise prices. Meanwhile, Apple and Samsung are doing just fine. They actually grew their sales or grabbed more market share, even with the slump. Apple kept prices steady while everyone else had to raise theirs. The iPhone 17 did great, and Apple grabbed a record 20% of the global market. Samsung, still on top with 24% market share, used its supply chain smarts to keep products on shelves, even when cheaper phones weren't selling. Samsung Galaxy S26 $780 $853.76 Save $73.76 SoC Snapdragon 8 Elite Gen 5 Display 6.3-inch Dynamic AMOLED 2x RAM 12 GB Storage 256 or 512 GB $780 at Walmart Expand Collapse For the average user, it means one thing: cheap, powerful phones are on pause for now. As long as AI keeps hogging all the memory, phone makers will focus on pricey models. If you want a deal, you might have to go refurbished or second market. If you do, make sure to check the battery health and ask if the phone has been factory reset. Look for sellers offering a warranty or return window, and avoid devices with signs of water damage or a locked bootloader. Buying from reputable shops or platforms with buyer protection can make a big difference, and always compare prices to new models to make sure you are getting a real deal.