The economics of the global smartphone market have shifted sharply as memory chip costs now consume nearly 60% of the bill of materials for devices priced below $400, and more than 64% for phones under $99, according to analysis by technology research firm Omdia. The firm projects that shipments of sub-$400 smartphones will decline by 22% this year, dragging the overall handset market to a 12% contraction compared with 2025. The same cost pressure is rippling through personal computers, where memory shortages have pushed average selling prices higher and contributed to a 4.9% year-on-year drop in global PC shipments in the second quarter of 2026, IDC data shows.

The root cause is the frenetic buildout of artificial intelligence infrastructure, which is absorbing vast quantities of DRAM and NAND flash memory from the same supply chains that feed consumer electronics. Omdia analyst Zaker Li notes that memory costs for phones in the sub-$400 tier nearly doubled between the third quarter of 2025 and the first quarter of 2026. For premium devices, the increase exceeded 100%. This has forced manufacturers to pass costs on to consumers. Samsung has raised prices on its budget Galaxy A and M series models in India seven times since January, each time by about 1,000 rupees. Apple warned that higher memory costs were “unavoidable” and raised Mac and iPad prices by 15% to 25% in June, while Microsoft will increase Xbox console prices by up to $150 in August.

Viewed from Asian manufacturing hubs, the pressure is most acute for Chinese brands that dominate the low-cost segment. Omdia expects Oppo, Vivo, Honor, Xiaomi, and Transsion to raise retail prices, and some vendors are considering exiting the sub-$150 market entirely because margins have evaporated. “If you sell a phone for $150 and half the cost is memory, where is the profit?” said Francisco Jeronimo, vice president at IDC. In the premium tier, Counterpoint Research estimates that Apple’s component costs for the upcoming iPhone 18 Pro Max have risen by nearly $300, driven by an 80–90% jump in NAND storage prices, and that even a $200 retail price increase would compress gross margins.

Consumer behaviour is shifting in response. In the United States, refurbished device sales are surging: Back Market reported a 62% week-on-week jump in MacBook sales the day after Apple’s price announcement, and Counterpoint data shows a 13% spike in pre-owned smartphone sales in the first half of 2026. A CNET/YouGov poll found nearly half of US adults had considered buying a secondhand tech product in the past year. The memory shortage is expected to persist until at least autumn 2027 or early 2028, when a slowdown in AI infrastructure spending and increased RAM production capacity could ease supply constraints, according to IDC’s Jeronimo.