Budget phones are dying because memory now eats the whole budget
The current budget phone market decline is driven by a DRAM price crisis, where smartphone memory costs have surged so high that sub-$400 phones are disappearing and consumers are being pushed into more expensive mid-range devices or the second-hand market. This is not a passing hiccup; it is a structural shock that changes what “cheap” means in smartphones. In the first quarter of 2026, memory accounted for almost 60% of the bill of materials in phones under $400, compared with about 32% just a few months earlier. When a single component swallows most of the budget, low-end models become economically unviable to produce, and manufacturers understandably stop trying. The result for ordinary buyers is harsh: fewer affordable options, higher prices, and weaker devices at every price tier.
How DRAM costs blew up the economics of cheap phones
The DRAM price crisis is not some mysterious market whim; it is a direct outcome of AI companies racing to secure high-bandwidth memory for data centres, which has driven up prices across the industry. According to research, memory now consumes nearly 60% of the materials cost in sub-$400 phones and an astonishing 64% in ultra-budget devices below $99. That single fact explains why budget phones are disappearing: there is no room left for profit once memory is paid for. Manufacturers tried to respond the usual way, trimming displays, sensors, and RF modules, but low-end phones were already built on razor-thin margins, leaving almost nothing left to cut. When your cheapest phones depend on components whose prices are rising faster than you can downgrade other parts, the business model breaks, and companies sensibly abandon that segment.
Manufacturers’ ugly choices: kill, up-price, or cripple budget lines
Once memory dominates the bill of materials, manufacturers are left with three bad options for sub-$400 phones: eliminate budget lines, push prices into the mid-range, or slash specs until the devices feel crippled. Some vendors have already raised retail prices, but this triggers the next problem: budget-conscious buyers are extremely sensitive to price and simply stop buying. Others quietly downgrade components, reverting, for example, to cheaper LTPS displays instead of newer LTPO panels, cutting a few dollars per device at the cost of features. They also drop camera modules, shrink sensors, or fall back to previous-generation chipsets to save 30–40% on those parts. None of these moves are consumer-friendly. They either leave people paying more for the same experience or paying the same for a noticeably worse phone. In practice, the industry is choosing a mix of all three, and the budget phone market decline is the predictable outcome.
What this means for consumers: mid-range is the new budget
For ordinary users, the affordable phone shortage is already visible. Rising memory prices have made budget smartphones commercially unviable, forcing people to delay upgrades, pay more for higher-tier devices, or turn to pre-owned phones instead. Omdia expects sub-$400 smartphone shipments to drop 22% year-on-year, while the overall market falls 12% and phones above $400 grow by about 5.7%. In plain language: mid-range phones are becoming the new entry-level baseline. If you wanted a capable device under $400 last year, you should expect to pay significantly more for similar performance now or accept reduced specs. Unsurprisingly, people are holding onto phones longer, with average lifetimes already over four years and expected to stretch further. The pre-owned market is one of the few winners, growing as consumers hunt for yesterday’s premium models at lower prices.
A permanent reset of smartphone segments
The uncomfortable truth is that this DRAM shock is unlikely to disappear soon. Forecasts suggest DRAM prices could jump another 50% or more, and memory makers are naturally prioritising high-margin AI data centres and premium hardware over cheap phones. That means the supply chain pressure that broke the budget segment is set to continue, reshaping smartphone market segmentation permanently. The old ladder of ultra-budget, budget, mid-range, and flagship is collapsing into a three-tier world: second-hand and older models at the bottom, mid-range as the new “budget”, and premium flagships at the top. Buyers can also expect devices to be less capable than what their price once implied, because manufacturers will keep trading off displays, cameras, and chipsets to absorb memory costs. The DRAM price crisis has exposed how fragile the idea of a cheap modern smartphone was; unless memory supply for consumer devices recovers, the era of plentiful sub-$400 phones is over.
