AI-driven memory crunch jolts India’s smartphone market
India's smartphone market is experiencing a sharp downturn as a global shortage of memory chips, driven by surging AI data centre demand, pushes up handset prices. Manufacturers such as Samsung, SK Hynix and Micron have redirected production towards high-bandwidth memory used in AI accelerators, which is far more profitable than the standard RAM and storage used in phones, squeezing supply and raising costs for consumer devices. This has made India, as the world's second-largest smartphone market, a key indicator of how the AI-driven chip crunch is spreading into everyday electronics.
Smartphone shipments in India fell 10% year-on-year in the April-June quarter, the steepest June-quarter decline in six years, according to Counterpoint Research, with the effect far more severe than in China's 2% drop, since roughly 60% of India's market sits in the sub-₹20,000 (under $210) price band most exposed to memory cost rises. Shipments in the sub-₹15,000 (under $150) segment collapsed by 45%, hitting Chinese budget brands hardest and pushing their combined market share to its lowest point since 2020, while Samsung was the only major brand to grow (up 2%) and Apple's 3% decline stemmed mainly from supply constraints. Consumers are expected to hold onto phones for around four years instead of 3.5, and OnePlus has already responded by withdrawing new launches from Europe and North America to focus on China and India, where it can remain profitable.
In short
- AI chip demand is driving up smartphone memory costs worldwide
- India's shipments fell 10% year-on-year, hitting budget phones hardest
- OnePlus is pulling new launches from Europe and North America
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
The concentration of chip supply toward high-margin AI applications represents a market failure for India's price-sensitive consumers who depend on affordable smartphones for digital economic access. When the sub-₹15,000 segment collapses by 45%, this isn't manufacturers responding to consumer demand but abandoning that market based purely on profit maximisation. This demonstrates how unbalanced incentives can create genuine inequity by pricing millions of people out of essential digital opportunity.
The case against
This represents rational market allocation where chip manufacturers respond to economic signals showing vastly higher value in AI infrastructure than consumer smartphones. Markets serve consumers most effectively by directing scarce resources toward applications commanding the highest economic value and profit incentives naturally encourage meeting urgent genuine demand. Samsung's growth and continuing competition shows the market functions properly, and consumers extending device lifespans reflects natural economic adaptation working as intended.
Explained simply
A global shortage of memory chips—the components that store and process data in smartphones—is pushing up handset prices across India, the world's second-largest smartphone market. Manufacturers have directed production towards more specialised memory components needed for artificial intelligence systems instead of the standard chips used in phones, because AI applications generate substantially higher profit margins. This reallocation has left standard memory chips in short supply for consumer phones and made them significantly more expensive.
Artificial intelligence data centres require large quantities of memory chips to process information. Companies like Samsung, SK Hynix and Micron, which manufacture these chips for both smartphones and artificial intelligence systems, have prioritised serving AI companies because these sales are far more lucrative. This shift in production has made standard memory chips scarcer and driven up their cost.
India's smartphone market has been particularly affected because roughly 60 per cent of phones sold there cost under £165, a price point especially vulnerable to rises in memory chip costs. The lowest-cost segment, where phones sell for under £120, has seen a sharp drop in sales, whilst more expensive brands like Apple and Samsung have weathered the shortage better. This demonstrates how the intense global competition for memory chips needed by artificial intelligence is affecting prices and availability of everyday consumer devices.
AI Art Asia Business Culture Gadgets Markets Technology World