Budget Phones Under $400 Are Becoming an Endangered Species
Budget phones under 400 dollars are increasingly disappearing because surging DRAM and NAND costs now consume most of their component budgets, forcing manufacturers to raise prices, cut features, or abandon the low-end smartphone segment altogether in the face of a global RAM shortage driven by booming AI infrastructure demand.
The uncomfortable truth is that the age of feature-rich, affordable Android phones is being wound down not by consumer choice, but by memory prices. Research firm Omdia reports that memory costs for sub-$400 devices jumped from 32% of the bill of materials in Q3 2025 to 59% in Q1 2026. When one component suddenly takes over more than half of the hardware budget, the whole idea of a cheap smartphone starts to break. Manufacturers that used to treat budget buyers as a growth market now see them as a margin risk, and their response is blunt: fewer models, higher prices, and more compromises.
| Phone segment | Memory share of BOM (Q3 2025) | Memory share of BOM (Q1 2026) |
|---|---|---|
| Sub-$400 phones | 32% | 59% |
| Sub-$99 phones | N/A in sources | 64% |
AI’s RAM Appetite and the Squeeze on Cheap Phone Prices
The RAM shortage smartphones face is not some mysterious market cycle; it is the direct side effect of AI’s hunger for memory. Chipmakers are prioritizing high-bandwidth memory (HBM) for lucrative data center contracts, cutting capacity for the more conventional DRAM and NAND used in phones. As AI firms shore up HBM for training and running massive models, the supply of cheaper memory parts shrinks and prices spike, with budget devices absorbing the worst of it.
This is why cheap phone prices rising is not a temporary sale hiccup but a structural shift. Analyst Zaker Li says memory manufacturing costs for phones under $400 have nearly doubled between late 2025 and early 2026. Premium phones can hide some of that jump behind higher sticker prices and generous margins. Low-end phones cannot. When memory alone takes up more than 64% of component costs for sub-$99 devices, manufacturers lose the room to keep those models alive without either gutting their capabilities or walking away.
How Manufacturers Are Gutting Specs or Leaving Budget Buyers Behind
Faced with exploding memory costs, Android makers now have a grim menu of choices: cut specs, raise prices, or exit the budget phones under 400 category. Rising memory costs have become a major burden for mid-to-low-end smartphones and are forcing companies to rethink how they build affordable devices. Many are downgrading displays from more advanced panels back to LTPS OLED, simplifying camera arrays, or falling back to older-generation processors as a way to claw back a few dollars from other parts.
But these workarounds only stretch so far. Instead of pushing affordable Android phones steadily closer to premium territory, brands are now rolling back RAM configurations and cutting hardware features to stay under a price ceiling. Others are choosing direct price hikes: Transsion, OPPO, vivo, Honor and Xiaomi are cited as brands that are increasing prices to protect thin margins. Some vendors are even considering leaving the budget segment entirely, arguing that if half the cost of a USD 150 (approx. RM690) phone is memory, selling it barely makes sense anymore.
What Budget Shoppers Can Expect Between Now and 2027
The most direct impact on ordinary users is brutal: fewer models and higher prices for anyone shopping budget phones under 400. Omdia warns that global shipments of smartphones in this segment will fall by more than 22%, driving an overall 12% drop in the smartphone market. In plain terms, there could be 22% fewer phones under $400 available for the rest of this year and into 2027. Buyers who want new cheap devices will either pay more for similar hardware or accept less RAM, weaker cameras, and older chips.
Affordable Android phones are where many people get online, so this contraction hits those with the least financial cushion hardest. If manufacturers trim their presence in the low end, consumers face fewer choices, slower hardware improvements, and higher prices. Many will respond by hanging onto their current devices longer instead of paying the new premiums for modest upgrades. In this context, one of the few sensible moves left for value-focused buyers is to look at last-generation phones, which may still bundle decent memory and features before the full pain of the RAM shortage is baked into every new release.
The Upside: This Crisis Has an Expiry Date
This squeeze on affordable Android phones is real, but it is not permanent. In the short term, the smartphone market will contract 12% compared with 2025, mainly because of the hit to sub-$400 shipments. For budget shoppers between now and 2027, that means living through a lean period: a thinner lineup of devices, cheap phone prices rising, and compromises baked into nearly every low-end option.
There is some relief on the horizon. According to IDC’s Francisco Jeronimo, the RAM crisis should be resolved by fall 2027 or early 2028, as capacity and supply catch up. Once memory stops costing a small fortune, manufacturers will again have room to rebuild compelling budget phones under 400 without sacrificing profits. Until then, buyers need to be more strategic: consider last-gen models, compare RAM and storage rather than chasing marketing buzzwords, and accept that for a few years, the "great cheap phone" will be harder to find and more important to hold onto when you do.
