The memory shortage that is rewriting the phone market
The current memory shortage in smartphones is a supply crunch where DRAM and NAND flash prices have surged so high that they now consume the majority of a budget phone’s component costs, forcing manufacturers to cut affordable models, raise prices, and push buyers toward more expensive devices. Omdia writes that, due to rising DRAM and NAND prices, mid-to-low-end smartphones are struggling with memory costs, leading to a 22% year-on-year decline in shipments of phones priced below $400. Smartphone shipments overall fell 11% in the second quarter, the steepest slump since 2013. In the first quarter, memory made up nearly 60% of the bill of materials for sub-$400 phones and more than 64% for devices under $99. When over half of a cheap phone’s cost is locked into memory, there is almost no room left to keep prices low without selling at a loss or shipping weaker products.
Why budget phones are disappearing while flagships survive
This is not a mystery about why phone prices are rising; it is a direct consequence of expensive memory squeezing thin margins. Omdia says the memory cost share in the sub-$400 segment nearly doubled between late 2025 and early 2026. Vendors tried to trim displays, sensors, and RF modules where supply is healthier, but low-end phones were already stripped to the minimum. Mid-tier brands such as Transsion, Oppo, Vivo, Honor, and Xiaomi have been forced to raise retail prices simply to keep very slim profits alive. For buyers who care most about price, “a $150 handset becoming a $200 handset could be enough to kill demand”. Faced with that, companies are backing away from the low-end segment and shifting to higher-margin models, which is why smartphones priced above $400 are expected to grow 5.7% even as the overall market shrinks.
AI is hogging the memory—and you are paying for it
The deeper cause of this memory shortage in smartphones is not your phone at all, but AI data centres. Memory makers are prioritizing high-end chips for AI servers because they bring in more profit than standard phone parts. That leaves fewer DRAM and NAND chips for phones, and prices for those components have surged. For cheaper phones, memory can account for up to 60% of the cost, so when DRAM and NAND prices spike, budget models become uneconomic to build. One analysis estimates combined DRAM and SSD prices will rise 130% by the end of 2026, lifting smartphone prices 13% compared with 2025. As long as AI soaks up supply, phone makers will keep focusing on pricey models rather than rebuilding the budget segment. For everyday users, it means cheap, powerful phones are on pause and entry-level devices now cost over 50% more than a year ago.
How the squeeze reshapes who wins—and who loses
This budget phone shortage is not hitting every brand equally. Smaller and mid-tier Android vendors leaned heavily on low-margin, high-volume models, so the memory shock cuts straight into their core business. Omdia notes vendors are gradually retreating from the low-end segment this year. Overall, global shipments of smartphones priced below $400 are projected to fall 22%, dragging the total market down 12% year-on-year. At the same time, phones above $400 are expected to grow, helped by makers shifting to higher-mid-range and high-end products, and by price inflation pushing more models into higher bands. The power vacuum at the bottom gives the giants more room. Apple and Samsung gained share even as shipments dropped; Apple held prices steady, grew sales, and reached a record 20% share, while Samsung stayed on top with 24% and kept products on shelves during the slump.
Buying in a flagship world: practical moves for your next phone
For now, flagship phone pricing pulls more buyers upward because mid-tier options look weaker for the money. Cheap, powerful phones are scarce, and as memory prices rise further over the coming quarters, analysts warn the situation will worsen. Gartner even predicts the same AI-driven memory crisis could wipe out sub-$500 PCs by 2028. If you need a phone soon and feel squeezed out of flagships, the most sensible move is to consider refurbished or second-market devices: if you want a deal, you might have to go refurbished. When you do, check battery health, confirm the phone has been factory reset, and prefer sellers offering a warranty or return window. Avoid signs of water damage or a locked bootloader, and compare prices with new models so you are not overpaying. Until memory costs cool down, smart shopping—not blind upgrading—is your best defense.
