AI-driven memory crisis shakes India’s smartphone market

After months of analysts to caution Although AI-driven demand for memory chips will spread across consumer electronics, India offers the strongest evidence yet that disruption has arrived, with rising mobile phone prices reshaping the smartphone market.

The memory chips in question — the RAM and storage components — are the same ones that tech giants need to build AI data centers. Manufacturers like Samsung, SK Hynix and Micron have shifted production capacity toward high-bandwidth memory, the specialty chips used in AI accelerators, because it is more profitable per chip than the standard memory used in phones and laptops — leaving less capacity, and increasing costs, for everyday consumer electronics.

India, the world’s second largest smartphone market in terms of shipments after China, saw a decline in smartphone shipments. 10% on an annual basis in the April-June quarter, according to market research firm Counterpoint Research, marking the biggest June quarter decline in six years as rising memory costs pushed up mobile phone prices.

The impact was more pronounced in India than in China, where smartphone shipments fell just 2% in the second quarter, according to Counterpoint. Tarun Pathak, the company’s vice president of research, told TechCrunch that India has been hit hard because about 60% of its smartphone market is concentrated in the sub-20,000 Indian rupee (less than $210) segment, where rising memory costs have had the biggest impact on prices.

India has been a prominent market for global smartphone brands for several years. Home to more than 1.4 billion people and more than 700 million smartphone users, the South Asian nation has become a bellwether for consumer demand in price-sensitive markets, sparking shifts in purchasing patterns that are closely watched by device makers, chip suppliers and investors tracking the broader health of the AI ​​supply chain.

Pathak told TechCrunch that consumers are unlikely to abandon smartphones completely. However, many are expected to delay upgrades, extending replacement cycles to around four years compared to around 3.5 years previously, while premium brands like Apple and Samsung remain better insulated from the slowdown.

The asymmetric impact is already reshaping competition between smartphone makers. Samsung was the only major smartphone brand to record shipment growth in India in the second quarter, with volumes rising 2% year-on-year, according to Counterpoint. By contrast, Apple saw shipments decline by 3% — although that decline largely reflects supply constraints and inventory shortages that limit the number of iPhones Apple can deliver.

Prashir Singh, a senior analyst at Counterpoint Research, told TechCrunch that consumers who buy high-end smartphones have proven to be less sensitive to price increases, as financing makes expensive devices more affordable.

The pain was most acute at the lower end of the market. Counterpoint said shipments in the sub-Rs 15,000 (less than $150) category were down 45% from the previous year. As Chinese brands have significant exposure to mid-range and mid-range smartphones, their combined market share fell to its lowest level in the second calendar quarter since 2020.

Tougher economic conditions are also driving strategic shifts. This week, Chinese smartphone brand OnePlus said so It will stop launching new products in Europe and North America, while maintaining its business in India, after what it described as a careful evaluation. Counterpoint data shared with TechCrunch showed that China accounted for 74% of OnePlus’ global smartphone shipments to distributors and retailers in the first quarter, up from 59% a year earlier, while India’s share fell to 19% from 30%.

In other words, OnePlus is retreating to markets where it can still make a profit and ceding ground elsewhere — a pattern likely to be repeated across other budget-focused brands as margins tighten.

In fact, Pathak told TechCrunch that running multiple sub-brands only makes sense if each one sells enough volume to cover shared costs, and that the math stops working once the margins become slim. “Sub-brands usually have overlaps and common resources, and need a minimum base to justify large profit margins. Profitability is key to defining market operations,” he said.

Consumers are feeling the pressure

This pressure on brands is transmitted directly to the people who buy their phones. The Indian smartphone market is shifting from volume-based growth to value-based growth — meaning fewer phones are sold overall, but each phone generates more revenue — as rising component costs make low-priced smartphones increasingly uneconomical, said Kiranjit Kaur, associate research director for mobile research at IDC.

Higher ingredient costs are already trickling down to consumers. Pathak said smartphone prices in India have risen by between 4% and 68%, depending on the model, and as prices rise, consumers either move to higher-priced devices, delay upgrading, or turn to the used market.

At the same time, financing has become “essential to affordability,” Kaur told TechCrunch. She added that brands and retailers are also building inventory ahead of the holiday season to cut costs before further increases in ingredient prices occur.

IDC also expects smartphone shipments in India to decline by double digits in the second quarter, a steeper decline than the 4.1% decline in the first quarter and the 5.3% decline in the previous quarter, Kaur said. But she indicated that the company’s estimates have not yet been finalized.

Memory shortages and rising smartphone prices are likely to continue until at least the end of 2027, Kaur told TechCrunch, though the pace of price increases should moderate as consumers gradually adjust to higher prices becoming the new normal.

“For Indian consumers, it is a double whammy as a weaker currency makes imports more expensive, which has increased margin pressures on market players, and they pass the cost on to the consumer,” Kaur said.