AI Driven RAM Shortage May Make Sub-Rs 9,000 Phones ‘Permanently Uneconomical’, Says IDC
The global smartphone industry is facing an unprecedented technology shift as an AI-driven RAM shortage threatens to reshape the smartphone market. In its latest forecast, analyst firm IDC warns that a severe imbalance between memory chip demand and supply could make affordable smartphones priced below roughly Rs 9,000 (about $100) permanently uneconomical to produce. This isn’t just a temporary hiccup — it’s turning into a structural challenge for manufacturers and consumers alike.
Why the AI Demand for Memory Chips Matters
The explosion of artificial intelligence has sent demand for high-performance memory components — especially DRAM and high-bandwidth variants — through the roof. These memory chips are the backbone of AI infrastructure in data centers, powering large-scale models and real-time processing. As hyperscale AI usage grows, memory manufacturers are prioritizing supply towards cloud and enterprise customers, leaving less capacity for consumer electronics.
This shift places budget smartphone makers in a difficult position. With less memory available for standard mobile devices, the cost to source essential components like RAM increases sharply. These price pressures are now trickling down to the retail level, pushing up the cost of manufacturing even the most basic smartphones.
Smartphone Shipments to Plummet, Prices to Rise
According to IDC’s forecasts, the smartphone market is forecast to shrink by nearly 12.9% in 2026, marking the steepest decline in more than a decade. This downturn is directly linked to the ongoing memory shortage and its ripple effects across the supply chain.
In addition to shipment declines, the average selling price (ASP) of smartphones is expected to climb significantly — by as much as 14% — as makers factor in rising component costs. This increase threatens to erode the traditional value proposition of entry-level phones that have long driven volume sales in emerging regions.
The Death of Entry-Level Smartphones?
One of the most alarming insights from IDC’s analysis is the prediction that smartphones priced under roughly Rs 9,000 will soon be “permanently uneconomical” to produce. In other words, manufacturers may no longer find it financially viable to build devices at this price point due to escalating memory costs.
This isn’t only about a short-lived price fluctuation — it represents a long-term shift in the economics of smartphone manufacturing. Even as memory prices potentially stabilize by mid-2027, they are unlikely to return to historical lows, meaning the lowest tiers of the market may be squeezed out permanently.
Impact on Manufacturers and Market Competition
Lower-end device makers are particularly vulnerable in this environment. Smaller brands that rely heavily on budget smartphone sales are likely to face shrinking margins and higher production costs. This could force consolidation within the industry — where only well-capitalized players survive.
Meanwhile, premium brands like Apple and Samsung are expected to fare relatively better. Larger companies can often absorb part of the cost increases or negotiate priority access to scarce memory components. As a result, the competitive landscape might shift further toward higher-end and mid-range devices.
Regional Variations in Impact
The consequences of the AI-driven RAM shortage won’t be felt equally across all markets. Regions with a high share of ultra-budget smartphone sales may experience more pronounced declines. For example:
- Markets in the Middle East and Africa could see smartphone shipments fall by more than 20% year-on-year due to heightened sensitivity to price changes.
- China is expected to witness around a 10.5% decline, reflecting the intense competition and the strong presence of low-cost Android devices.
- The Asia Pacific region (excluding Japan) is also forecast to face significant reductions — around 13.1%.
These regional forecasts underscore the broader threat that the memory shortage poses to global smartphone demand, particularly in cost-sensitive markets.
How Smartphone Makers Are Responding
In response to these challenges, some smartphone makers are already adjusting strategies. Reports indicate that brands may prioritize premium devices, slash production of entry-level models, or even consider lowering hardware specifications to offset rising costs.
Industry leaders have also highlighted alternatives. For instance, scaling back RAM specifications slightly or rethinking storage configurations could help maintain price points for consumers. However, these measures risk diminishing the overall value and performance proposition of future devices if memory costs remain high.
What This Means for Consumers
For tech enthusiasts and everyday buyers alike, these changes could mean higher prices across the board — especially for affordable phones that have historically driven smartphone adoption in emerging economies. Entry-level models that once gave millions their first smartphone experience may soon become rare or significantly more expensive.
Consumers may also witness a shift in device specifications, with manufacturers opting for different trade-offs between price, performance, and memory to stay competitive. This might lead to a new era of smartphone design, where tiny cost savings in RAM or storage are used to strike a balance between affordability and functionality.
If you want to stay ahead of the latest tech industry shifts and understand how emerging trends like AI, memory shortages, and smartphone market dynamics affect you, visit Infoproweekly.
