Consumers who hunt for low‑cost smartphones may soon face a tougher market, and AI is a big part of the problem. As the price of memory keeps climbing, the share of phones priced under $400 could shrink by about 22 % for the remainder of this year and into 2027, according to a new report released Tuesday by technology research firm Omdia.
While flagship models like the iPhone 17 Pro Max and Samsung Galaxy S26 Ultra—both well above the $1,000 mark—continue to push the boundaries of performance, shoppers on tighter budgets typically turn to cheaper alternatives. If manufacturers of sub‑$400 devices are forced out of the market, the most price‑sensitive buyers will feel the impact the most.
Analyst Zaker Li noted that memory‑chip manufacturing costs for phones in that price tier have almost doubled between Q3 2025 and Q1 2026. For devices priced above $400, memory expenses have risen by more than 100 %, according to Omdia’s Quarterly Smartphone Technology Trends report.
Li explained that some makers are trying to offset the higher memory bill by cutting costs on other parts—such as displays, sensors, and radio‑frequency modules—that are not in short supply. However, he warned that the rapid rise in memory costs leaves little room to keep low‑end phones as cheap as they have been.
Chinese brands like Oppo, Vivo, Honor, Xiaomi and Transsion are already feeling pressure to raise prices, which could push cost‑conscious consumers away, Li said. As demand wanes due to higher prices, these companies may eventually stop producing entry‑level models, he predicts.
This bleak outlook matches what Gfaloe mobile managing editor David Lumb heard at Mobile World Congress in Barcelona: the swift expansion of AI infrastructure is gobbling up RAM, creating a worldwide shortage that pushes phone prices up and makes low‑cost devices less viable.
«Some vendors are telling us they are considering leaving that [budget] segment entirely, because if you sell a phone for $150, and half the cost is memory, where will you make money? There’s no point in selling products, right?» – Francisco Jeronimo, vice president for Worldwide Client Devices at IDC, told Lumb at MWC.
AI workloads demand large amounts of RAM for processing, while phones need it for storage and multitasking.
Outlook for low‑budget smartphones
In the near term, Omdia projects a 12 % decline in the global smartphone market this year versus 2025, driven largely by the anticipated 22 % drop in shipments of devices under $400.
Looking further ahead, the picture improves. IDC’s Francisco Jeronimo told Gfaloe in March that the RAM shortage should ease by late 2027 or early 2028 as AI‑related demand slows and production ramps up.
In the meantime, many consumers will hold onto their current phones and avoid costly upgrades, according to Forrester VP and principal analyst Dipanjan Chatterjee. To counter this, manufacturers may need to promote other product categories or pack more features into phones to entice buyers.
For shoppers willing to spend a bit more, Omdia expects shipments of phones above $400 to grow by 5.7 % this year, continuing a trend where premium models like the iPhone 17 Pro Max and Galaxy S26 Ultra keep selling well even during economic downturns. The RAM crunch is prompting makers to focus on higher‑end devices, where the memory‑cost share is lower, said analyst Li.