Memory prices drive 22% drop in sub-$400 phone shipments

A severe shortage and sharp price increases for memory chips are causing a crisis in the global smartphone market, forcing manufacturers to scale back production of budget devices and raising costs for consumers. New industry analysis shows memory now accounts for nearly 60 percent of the total component cost for smartphones priced below $400, leading to a projected 22 percent decline in shipments for that segment this year.

The broader global smartphone market is forecast to contract by 12 percent in 2026, according to data from analyst firm Omdia. In contrast, the premium segment for devices priced above $400 remains resilient, with shipments expected to grow by 5.7 percent. This stark divide highlights how a supply-demand imbalance, driven largely by soaring demand from artificial intelligence data centers, is reshaping the industry.

For budget and mid-range devices, the cost structure has transformed dramatically. In the first quarter of 2026, memory accounted for 59 percent of the bill of materials for sub-$400 phones, a figure that surges to 64 percent for ultra-budget models under $100. Just months earlier, in the third quarter of 2025, that share was approximately 32...