Demand for memory components from artificial-intelligence data centers has created a global shortage that is inflating the cost of manufacturing phones. Existing handset models have become about fifteen percent more expensive this year, while brand-new releases are roughly twenty-five percent pricier than a year ago, according to market observations.
Chinese manufacturers, responsible for around sixty percent of worldwide shipments, are scaling back projects aimed at the lowest price tier. Senior analyst Ivan Lam of Counterpoint said firms are redirecting investment toward higher-margin premium devices, abandoning many entry-level offerings that previously cost under one hundred fifty dollars.
Price pressure is not uniform across regions. In India, average phone prices have risen twenty-one percent, while the Asia-Pacific region sees a nineteen percent increase and the Middle East and Africa a similar eighteen percent jump. The United States experiences a modest five percent rise, but the overall trend threatens to widen the digital divide, according to GSMA’s digital inclusion chief.
The segment of smartphones priced below one hundred fifty dollars, which accounted for more than a quarter of shipments in 2025, is now contracting. Companies are opting to allocate resources to higher-priced models, branding, user experience, and AI features rather than maintaining the sub-$150 product line.
Concrete examples illustrate the shift. Xiaomi raised the price of its Redmi 15C in India by thirty-six percent within six months. Oppo’s shipments of phones under one hundred dollars fell ninety-six percent in Southeast Asia, and Vivo moved its main entry-level handset above the one-hundred-dollar mark in most markets. In Africa, sub-one-hundred-dollar shipments dropped thirty-four percent in the second quarter of 2026.
The memory-chip shortage is expected to persist. Samsung, SK Hynix and Micron together control more than ninety percent of the market and have formed several partnerships with U.S. AI giants. IDC’s research director warned that relief is unlikely in the near term, reinforcing pressure on handset manufacturers.
Shipments of sub-one-hundred-dollar smartphones, which totaled 173 million last year, are now falling by almost sixty percent year over year in the second quarter of 2026. For the poorest consumers, an entry-level device represents forty-four percent of monthly income for the lowest-income twentieth, and seventy-six percent in sub-Saharan Africa, prompting many to delay upgrades, share devices, or go offline, as noted by GSMA’s digital inclusion lead.