Research firm Omdia now expects global smartphone shipments to fall 7% in 2026, driven largely by a memory-chip price spike that is hitting budget phones hardest: shipments of handsets priced under $400 are forecast to drop more than 22% for the year, and phones under $100 could fall nearly 31%.
The culprit is the cost of DRAM and NAND flash, the memory chips every phone needs for short-term processing and long-term storage. DRAM prices rose more than 50% and NAND prices more than 90% between the fourth quarter of 2025 and the first quarter of 2026, according to industry trackers. Memory now accounts for close to 60% of the total bill of materials on a sub-$400 phone, Omdia found — nearly double its share as recently as the third quarter of 2025 — and on phones under $100, memory alone can eat up more than 64% of what it costs to build the device.
The shortage traces back to the same data centers powering the generative-AI boom. Memory makers have been shifting wafer capacity toward high-bandwidth memory built for AI accelerators, leaving conventional DRAM and NAND supply growing far more slowly than in past years and squeezing a component budget phones have almost no room to absorb.
Cheap phones get cheaper components, not cheaper prices
Vendors including Transsion, Oppo, Vivo, Honor and Xiaomi have begun raising retail prices to protect margins, according to a review of the Omdia data. Others are cutting corners elsewhere to hold the line on price: trimming spending on displays, camera sensors and radio components, swapping premium LTPO OLED screens for cheaper LTPS panels to save a few dollars a unit, and stretching the lifespan of older chip platforms rather than refreshing them annually.
Higher-end phones are proving more insulated. Omdia projects the above-$400 segment will grow 5.7% in 2026, since processors and camera systems make up a larger share of a flagship's costs, giving makers more places to trim than a budget phone has. Separate reporting found flagship bills of materials could still rise $150 to $200 by the second quarter of 2026, even as entry-level devices absorb roughly $30 increases, with Samsung's decision to drop a planned Galaxy S26 Edge model cited as one example of memory costs reshaping product lineups.
Analysts expect the squeeze to persist through 2026 as AI infrastructure spending continues to compete with consumer electronics for the same fabs, meaning the cheapest phones on the market are likely to keep shrinking in number even as the priciest ones keep selling.
