AI is killing the cheap smartphone. The memory that powers your phone now goes to data centres instead.
Memory manufacturers like Samsung, SK Hynix, and Micron redirected production from smartphones to AI chips, causing LPDDR prices to surge 250% and collapsing India’s sub-$100 smartphone market by 59%. Companies like Transsion, Oppo, and Vivo reported sharp shipment declines and profit drops as budget phone production became uneconomical due to soaring memory costs.
The global smartphone market is facing its largest single-year decline in 2026, with a 13% drop in shipments worldwide and over 20% in Africa and the Middle East, according to the International Data Corporation. The shift is driven by a reallocation of memory production from consumer electronics to AI data centers, as companies prioritize high-margin HBM chips for AI training. Samsung, SK Hynix, and Micron dominate over 90% of global DRAM production, and their shift to AI memory has caused prices for LPDDR4 and LPDDR5 to surge by 250% and 220%, respectively. Micron discontinued its consumer brand Crucial in December 2025, redirecting all production to AI and enterprise use. By 2026, HBM will account for 20% of memory makers’ wafer production, up from just 2% in 2023. Budget smartphone manufacturers like Transsion, Oppo, and Vivo are hardest hit, as memory now constitutes up to 50% of their production costs. Transsion, which held 48% of Africa’s smartphone market in 2024, saw its net profit fall 54% in 2025 and cut shipment targets by 40%. India’s sub-$100 smartphone market collapsed by 59% year-over-year in Q1 2026. The structural shift has made sub-$100 phones permanently uneconomical, with prices rising from $50 to over $120. Xiaomi’s shipments dropped 19% in Q1 2026, while Oppo and Vivo reduced production by over 20% and 15%, respectively. Analysts warn that the reallocation of memory capacity toward AI will continue to reshape the entire electronics market.
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