The new reality: AI is making budget phones a luxury
The AI chip supply crisis is a global shortage of affordable memory components driven by AI infrastructure demand, which is forcing manufacturers to cut back on low-cost smartphones, raise prices on remaining budget devices, and shift resources toward more profitable mid-range and premium models.
If you feel like budget smartphone prices are rising and good cheap phones are vanishing, you are not imagining it. Rising DRAM and NAND costs have turned what used to be safe value buys into money-losing products for manufacturers. Memory alone now eats nearly 60% of the bill of materials for sub-USD 400 (approx. RM1840) devices, and more than 64% for the ultra-budget under-USD 99 (approx. RM460) tier. When one component swallows that much of the cost, every extra gigabyte of RAM becomes a liability instead of a selling point. The result: cheap phones disappearing from store shelves while the industry nudges you up-market.
How the AI chip supply crisis hijacked phone memory
The core problem is not that memory suddenly became technically harder; it is that AI data centers pay more for it. Explosive demand for memory used in AI infrastructure pushed chipmakers to prioritize high-bandwidth memory for data center customers, shrinking capacity for older DRAM and NAND products that budget phones depend on. One source describes the situation bluntly: it is “all thanks to the AI bubble causing a run on memory chips.”
This supply squeeze has sent prices rocketing. Analysts expect DRAM prices to jump by 50% or more, making it almost impossible for budget device makers to avoid passing on the cost. The DRAM shortage impact on phones is especially harsh for low-end models, where there is almost no slack in the budget. Instead of subsidizing affordable devices, memory fabs are following the margins. That is rational business, but it leaves everyday buyers subsidizing the AI boom every time they upgrade a handset.
Why sub-USD 400 phones are first on the chopping block
Budget smartphones are being sacrificed because their economics snap under the weight of today’s memory prices. In the first quarter, memory costs accounted for nearly 60% of the bill of materials for smartphones priced below USD 400 (approx. RM1840). For devices under USD 99 (approx. RM460), that share passed 64%. When one component dominates the cost structure, there is no room left to trim displays, cameras, or radios without ruining the product.
The outcome is brutal: smartphone models priced below USD 400 (approx. RM1840) are projected to record a 22% decline in shipments as soaring DRAM and NAND costs make them unprofitable. In other words, cheap phones disappearing is not a side effect; it is the business decision. Vendors cannot keep selling devices that lose money to satisfy cost-conscious buyers, so they quietly kill off lines, delay refreshes, or stop stocking lower trims. The DRAM shortage impact on phones is being borne by the people least able to absorb it.
How manufacturers are reshaping the market – and your choices
Phone makers are not taking this hit themselves; they are reshaping their lineups and pushing you upward. Vendors are shifting production priority toward mid-to-high-end phones and focusing on segments above USD 400 (approx. RM1840), where shipments are still expected to grow by 5.7%. In those devices, memory is a smaller slice of the total cost, so companies can cut back on other components to absorb part of the DRAM shock.
To survive, manufacturers are quietly raising entry-level prices and hollowing out what “budget” means. Brands are switching from higher-end LTPO panels back to cheaper LTPS displays, removing cameras, shrinking sensors, or using older-generation processors to claw back a few dollars per device. Yet even these compromises can only go so far. Android phones may get more expensive or less capable as companies protect razor-thin margins. The message is clear: if you want the full feature set, especially AI features on flagship models, you are expected to pay more while the true entry-level segment withers.
What this means for buyers and the future of budget phones
This AI chip supply crisis is not a temporary sale glitch; it is a structural shift that tilts the whole smartphone market toward higher prices. Rising memory prices are making budget smartphones commercially unviable, forcing users to delay upgrades, pay more for higher-tier devices, or turn to the second-hand market instead. The result could be a major contraction in the budget phone market, especially for sub-USD 400 (approx. RM1840) devices that once offered the best value.
The harsh truth is that AI’s gains in the cloud are being paid for by people at the checkout line. Budget smartphone prices rising are not an accident; they are the direct outcome of memory makers and phone brands chasing AI margins. Unless memory supply shifts back toward consumer hardware, buyers should expect fewer options, higher entry-level prices, and more pressure to accept older chips and stripped-down features. For now, the age of the polished, cheap smartphone is ending so the AI era can thrive.
