The Budget Smartphone Decline Is No Accident
The budget smartphone decline refers to the rapid contraction of the affordable phone market, where models priced below USD 400 (approx. RM1,840) are becoming uneconomical to build as rising memory chip prices push smartphone production costs beyond what cost-sensitive buyers will pay, forcing manufacturers to cut models, raise prices, or exit this segment altogether.
The global budget smartphone sector is not slipping; it is being pushed off a cliff by memory economics. Analyst data shows that smartphones priced below USD 400 (approx. RM1,840) are set to suffer a 22% drop in shipments this year as DRAM and NAND costs turn low-end models into loss-making products. According to research from Omdia, “the global budget smartphone sector is facing a severe crisis as surging memory prices force manufacturers to scale back production.” This is not a temporary blip or a quirky market cycle. It is the predictable result of a supply chain that now prizes AI data centres and premium hardware over cheap handsets, and the first big casualty is the under-USD 400 (approx. RM1,840) device many people rely on as their primary computer.
Memory Chip Prices Are Rewriting Smartphone Production Costs
Inside a budget phone, memory used to be another line item; now it is the whole story. The cost structure for mobile devices has been transformed as DRAM and NAND prices spike. In the first quarter of 2026, memory accounted for nearly 60% of the bill of materials for smartphones under USD 400 (approx. RM1,840), and more than 64% for ultra-budget devices below USD 99 (approx. RM455). Omdia notes that memory’s cost share in the sub-USD 400 (approx. RM1,840) bracket nearly doubled between Q3 2025 and Q1 2026, with phones above USD 400 (approx. RM1,840) also seeing memory’s share more than double.
When one component eats well over half the hardware budget, there is nowhere sensible left to cut. Vendors tried shaving costs from displays, sensors, and RF modules, where supply remains less constrained, but low-end devices were already built on razor-thin margins. At some point the trade-off becomes intolerable: either you ship a noticeably worse phone, or you raise the price and hope your target buyer can stretch. Most brands have concluded that neither option works long term, which is why they are shrinking their affordable phone lines instead of endlessly compromising them.
Why Manufacturers Are Walking Away from Cheap Phones
The uncomfortable truth is that sub-USD 400 (approx. RM1,840) phones no longer make financial sense for many brands. With memory swallowing up to 60–64% of the bill of materials, there is very little margin left to cover processors, cameras, batteries, distribution, marketing, and profit. Unlike premium models, where companies can swap in slightly older chipsets or cheaper displays to defend margins, budget devices offer almost no “wiggle room.”
Manufacturers including Transsion, OPPO, vivo, Honor, and Xiaomi have responded by hiking retail prices simply to keep their thin profits intact. But this hits the most price-sensitive consumers. Turning a USD 150 (approx. RM690) handset into a USD 200 (approx. RM920) one is enough to kill demand in this segment, where price is often the deciding factor. The outcome is predictable: sales fall, inventory risk rises, and vendors quietly withdraw from the lowest tiers. Omdia notes that companies are “gradually retreating from the low-end segment this year,” a polite way of saying that affordable options are being sacrificed to protect balance sheets.
The Affordable Phone Market Is Being Squeezed from Both Ends
For everyday users, the impact of this budget smartphone decline is already visible in store shelves and online listings. There are fewer choices under USD 400 (approx. RM1,840), and many long-running series have crept into higher price bands despite offering similar hardware. As vendors lift prices to offset memory-driven smartphone production costs, budget-conscious buyers walk away, causing demand to collapse. A market that once thrived on volume is now stuck: sell at a loss, or sell so few units that the line is no longer worth the effort.
This squeeze is made worse by what is happening above. Phones priced over USD 400 (approx. RM1,840) are expected to grow shipments by 5.7%, helped by brands shifting focus to higher-mid and high-end tiers and by wealthier buyers who are less likely to delay purchases. As more devices are nudged into these bands, the gap between a fading low-end and a thriving premium class widens. The result is a smartphone landscape with plenty of aspirational flagships and mid-high models, but a shrinking base of reliable, genuinely affordable options.
A Market Tilting Permanently Toward High-End Devices
The most worrying part of this memory crisis is that it does not look temporary. Zaker Li, principal analyst at Omdia, warns that memory costs for mid-to-low-end smartphones “will worsen as memory prices continue to rise in the coming quarters.” Manufacturers are prioritising supply for high-margin AI data centres and premium hardware, marking “a definitive end to the era of cheap, abundant memory for consumer devices.” With that structural shift, hoping for a quick return of ultra-cheap handsets is wishful thinking.
The broader smartphone market is forecast to contract 12% this year, even as the premium sector grows. That divergence tells you where the industry is heading: fewer players, fewer models, and a heavy tilt toward devices that cost more and profit more. If this continues, the smartphone will remain the default personal computer for billions, but owning a capable one will demand a larger share of household budgets. The budget smartphone decline is not just a product story; it is a warning about a tech ecosystem that risks leaving its most price-sensitive users behind.
