India’s smartphone market is facing a significant downturn as surging demand for artificial intelligence-driven memory chips forces manufacturers to hike device prices. According to Counterpoint Research, India saw a 10% year-over-year decline in smartphone shipments during the April-June quarter, the steepest June-quarter drop in six years, as rising costs for RAM and storage components squeezed the price-sensitive market.
The AI Supply Chain Squeeze on Consumer Electronics
The global shift toward artificial intelligence is fundamentally changing how memory manufacturers allocate production. Companies like Samsung, SK Hynix, and Micron are prioritizing the production of high-bandwidth memory (HBM)—the specialized chips used in AI accelerators—over standard RAM and storage chips. Because HBM offers higher profit margins per wafer, manufacturers have reduced capacity for consumer-grade components, leading to a supply-side crunch that is driving up costs for smartphones and laptops.
This reallocation of resources is felt most acutely in emerging markets. Tarun Pathak, vice president of research at Counterpoint Research, noted that the impact is particularly severe in India because roughly 60% of its smartphone market is concentrated in the sub-₹20,000 (approximately $210) segment. In this price-conscious category, even modest increases in component costs force significant retail price hikes.
Did you know?
While India’s smartphone shipments fell 10% in the second quarter, China’s shipments declined by only 2%. Analysts attribute this disparity to India’s heavy reliance on the budget-friendly handset segment, which is highly vulnerable to component price fluctuations.
Market Polarization: Premium vs. Budget Devices
The current economic environment is reshaping competition, creating a clear divide between premium brands and entry-level manufacturers. According to Counterpoint Research, Samsung was the only major brand to record shipment growth in India during the second quarter, rising 2% year-over-year. Conversely, shipments in the sub-₹15,000 (under $150) segment plummeted 45% compared to the previous year.
For budget-focused manufacturers, the math is becoming increasingly difficult. Prachir Singh, a senior analyst at Counterpoint Research, explained that consumers buying high-end devices remain largely insulated from price increases, often aided by financing options. However, brands that rely on low-margin, high-volume sales are struggling to cover shared costs. This pressure has led to strategic retreats; OnePlus, for instance, recently announced it would stop launching new products in North America and Europe to focus on its India business, a move analysts suggest may become a broader industry trend as margins tighten.
Long-Term Shifts in Consumer Buying Behavior
The rise in component costs is effectively ending the era of rapid, volume-led growth in the Indian smartphone sector. Kiranjeet Kaur, associate research director for mobile phones research at IDC, told TechCrunch that the market is transitioning toward “value growth,” where the focus shifts from the number of units sold to the revenue generated per device. Consumers are responding by stretching their upgrade cycles, which have extended from about 3.5 years to around four years.
Price increases for handsets in India currently range from 4% to 68% depending on the specific model, according to Pathak. Experts suggest this “new normal” for pricing could persist for several years. Kaur estimates that memory shortages and elevated costs may continue until at least the end of 2027. Additionally, the weakness of the local currency is compounding the issue, making imports costlier for market players, a cost that is inevitably passed down to the end user.
Pro Tip:
If you are planning to upgrade your smartphone, keep an eye on seasonal sales. Retailers and brands are currently building inventory ahead of the festive season, which may offer temporary price stability before further component cost increases take effect.
Frequently Asked Questions
Why are smartphone prices rising?
Smartphone prices are rising primarily because memory chip manufacturers are shifting production capacity toward high-bandwidth memory for AI data centers. This has reduced the supply of standard memory chips, driving up costs for consumer electronics.
How long will the current smartphone shortage last?
According to IDC, memory shortages and elevated smartphone prices are likely to persist until at least the end of 2027 as the industry adjusts to the new demand for AI-related components.
Are all smartphone brands affected equally?
No. Premium brands like Apple and Samsung are better positioned to weather price increases because their customers are less price-sensitive. Budget-focused brands, which rely on thin margins and high sales volumes, are facing the most significant financial pressure.
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