Budget phones are no longer safe from premium pricing
The current surge in DRAM and NAND memory prices is reshaping the budget smartphone market by squeezing already thin margins, forcing manufacturers to raise prices, cut specifications, or abandon low-cost models, and leaving consumers with fewer affordable smartphone options and higher entry prices.
The headline truth is blunt: budget phone prices are rising because memory has swallowed the bill of materials. According to research from Omdia, memory costs now account for nearly 60% of the total bill of materials for smartphones priced below USD 400 (approx. RM1,840), up from around one-third in late 2025. Phones under USD 99 (approx. RM455) are even worse off, with memory making up more than 64% of component costs. When over half of a cheap phone’s cost is locked into DRAM and NAND, there is almost no room left to make money or to absorb more increases. This is not a temporary annoyance; it is a structural problem that will redefine what “budget” means.
How AI’s memory appetite drained the cheap phone budget
The memory chip shortage hitting phones did not come out of nowhere; it is collateral damage from the AI boom. A key driver behind the shortage is the explosive demand for memory used in AI infrastructure. Chipmakers have pivoted capacity toward higher-margin products such as high-bandwidth memory for AI data centers, reducing available capacity for the older DRAM and NAND that budget phones depend on. The rapid building out of AI infrastructure is using up memory, with a lot of RAM needed to power AI systems, and it has caused a global RAM shortage that is leading to higher prices for phones.
In other words, every flashy AI server rack makes life harder for someone trying to buy a USD 200 (approx. RM920) Android device. The industry is quietly prioritizing data centers over cheap handsets because the margins are better. That may be rational for chipmakers, but it is terrible news for consumers at the low end, where a few extra dollars in DRAM and NAND cost increase can decide whether a phone gets built at all.
Spec cuts, price hikes, or exit: the ugly choice for manufacturers
For phone brands, the math has become brutal. Omdia notes that inexpensive Android phones, especially in the sub-USD 400 (approx. RM1,840) segment, face rising DRAM and NAND prices that are pressuring margins. Phones priced below USD 99 (approx. RM455) now see memory account for more than 64% of component costs, leaving manufacturers with little room to absorb further increases. The result is a forced choice: raise prices, cut features, or walk away from budget devices altogether.
To protect thin profit margins, brands including Transsion, OPPO, vivo, Honor, and Xiaomi are opting for price increases. Others are stripping hardware: switching from higher-end displays to cheaper alternatives, simplifying camera setups, or using older-generation processors instead of newer chips. Instead of adding more RAM and upgrading every major component each year, manufacturers are now releasing phones with older processors, fewer cameras, or less memory than previous generations. Some vendors are even considering leaving the budget segment entirely, arguing that if you sell a phone for USD 150 (approx. RM690) and half the cost is memory, there is little reason to stay.
Fewer affordable options and a shrinking sub-$400 market
The consequences for ordinary buyers are clear: affordable smartphone options are thinning out. Omdia forecasts global shipments of smartphones priced below USD 400 (approx. RM1,840) will fall by more than 22% in 2026, contributing to a projected 12% decline in the overall smartphone market. Another report from the same firm warns there could be 22% fewer phones under USD 400 (approx. RM1,840) on the market for the rest of this year and into 2027. Meanwhile, smartphones priced above USD 400 (approx. RM1,840) are expected to grow 5.7% in 2026, supported by stronger margins and customers less sensitive to price hikes.
If manufacturers reduce their presence in the sub-USD 400 (approx. RM1,840) category, consumers may face fewer choices, slower hardware improvements, and higher prices. Budget phone prices rising does not simply mean paying a bit more; it means entry-level buyers may be pushed into aging models or forced to stretch for midrange devices. As Chinese phone-makers such as Oppo, Vivo, Honor, Xiaomi and Transsion are forced to raise phone prices, cost-conscious consumers will stop buying them, and companies could stop producing low-end phones. The people with the least economic cushion are the ones who will feel this squeeze first and hardest.
What buyers should do until the RAM crunch eases
The outlook is not permanently bleak, but it demands pragmatism. IDC’s Francisco Jeronimo expects the RAM crisis to be resolved by the fall of 2027 or early 2028, as AI infrastructure build-out slows and more RAM is produced. Until then, the memory chip shortage will keep DRAM and NAND prices elevated, and budget phones will remain under pressure.
In the near term, buyers looking for the best value might find it in discounted previous-generation phones rather than newly launched budget models. New “cheap” devices are more likely to be compromised by spec cuts and price hikes. Many consumers will simply stick with their current phones and avoid paying higher prices for upgrades, forcing brands to lure them with non-phone products or extra features. The smart move for budget-conscious shoppers is to assume that sub-USD 400 (approx. RM1,840) phones will be rarer and less exciting, and to plan purchases around sales cycles and older models instead of waiting for the next big budget launch.
