Budget Smartphone Shipments Set to Fall 22% as Memory Costs Surge

Budget smartphone shipments are expected to fall by more than 22% year-on-year in 2026 as rising memory prices make the cheapest handsets increasingly difficult to build and sell profitably, according to Omdia’s latest forecast. The research firm expects the wider global smartphone market to decline by 12% this year, while shipments in the above-$400 segment are forecast to grow 5.7%.

The forecast, published by Omdia in May and drawn from its Quarterly Smartphone Technology Trends report, points to an unusually severe squeeze at the bottom of the market. Its findings were published in a report on 7 July and picked up by Android Authority and The Register on 7 and 8 July.

Memory is taking most of the budget

In the first quarter of 2026, DRAM and NAND flash accounted for nearly 60% of the total bill of materials for smartphones priced below $400, Omdia said. For devices priced below $99, that share rose above 64%.

That is a dramatic shift from just a few months earlier. The proportion nearly doubled between the third quarter of 2025 and the first quarter of 2026, turning a component category that had represented roughly a third of a budget phone’s manufacturing cost into more than half of it. Even phones priced above $400 saw memory’s share of their bill of materials rise by more than 100% over the same period.

“Memory costs have become a serious burden for mid-to-low-end smartphones. The situation will worsen as memory prices continue to rise in the coming quarters.”

Zaker Li, principal analyst at Omdia, made that warning as the firm said low-end phones were already becoming unprofitable and faced a high risk of weaker demand as retail prices rise.

The effect is already being felt by brands including Transsion, OPPO, vivo, Honor and Xiaomi, which are raising retail prices to protect margins as price-sensitive buyers pull back. Counterpoint Research recorded a 13% year-on-year fall in smartphone sales during a month-long promotional period from 26 May to 21 June. All major Chinese smartphone brands except Huawei posted double-digit declines, with Honor down 33% and Xiaomi down 24%.

AI data centres are absorbing supply

The immediate problem is memory supply. Data centres now consume an estimated 70% of all memory chips produced worldwide, according to the research cited in Omdia’s analysis. IDC says Samsung, SK Hynix and Micron, which control more than 95% of global DRAM production, have shifted manufacturing capacity towards high-bandwidth memory used in AI accelerators.

That has left consumer-grade DRAM and NAND flash in critically short supply. Micron, which holds an 11% market share, announced in December 2025 that it would leave the consumer memory and storage market in favour of AI data-centre customers.

TrendForce’s 14 May pricing survey found mobile DRAM prices surged again in the second quarter of 2026. LPDDR5X rose by 78% to 83% quarter-on-quarter, while LPDDR4X increased by 70% to 75%. In some cases, DRAM spot prices have jumped nearly 700% over the past year.

Manufacturers have limited room to absorb that increase on low-cost devices. Ross Rubin, principal analyst at Reticle Research, said: “Because budget phones are already engineered to the tightest possible margins, manufacturers have no ‘fat to trim’ when component costs spike.”

Rob Enderle said vendors are “actively freezing memory capacities at previous-generation levels” and that some are eliminating higher-capacity versions from lower-tier ranges. He also said manufacturers are making compromises elsewhere, including dropping redundant macro cameras or returning to smaller image sensors, to offset memory premiums.

UK buyers should expect fewer bargains

For British shoppers, the consequences are likely to extend beyond a higher sticker price. Alex Baldock, chief executive of Currys, has said shoppers should expect smartphone and laptop prices to rise later this year. Counterpoint Research expects average smartphone selling prices to rise 6.9% year-on-year in 2026, while Gartner has forecast smartphone prices could be roughly 13% higher than in 2025.

Budget 2026 models, including Motorola and Nokia devices, are seeing a return to 6GB of RAM. Less memory can restrict multitasking and make resource-heavy apps run less smoothly, while reduced NAND storage leaves less capacity for photos, videos and system updates. As AI features and other software require more memory, lower-spec devices may feel sluggish sooner.

The crunch is not expected to ease quickly. Jefferies Equity Research projects DRAM and NAND prices will rise by 40% to 50% quarter-on-quarter in the third quarter, followed by another 30% to 40% in the fourth. TrendForce expects a slower, but still substantial, rise in conventional DRAM and NAND contract prices in the third quarter.

New capacity is coming, but not in time to resolve the near-term gap. Samsung and SK Hynix are investing alongside the South Korean government in new manufacturing facilities, while Samsung’s P5 site in Pyeongtaek is expected to be operational by 2028 and SK Hynix’s M15X facility is slated for utilisation by mid-2027. Samsung memory chief Kim Jaejune has warned that “significant shortages” are expected to continue through at least 2027.

That leaves budget-phone buyers facing a less generous market: higher prices, fewer discounts and a greater chance that affordable models will arrive with compromises that would have been unthinkable only a year ago.