Months after analysts warned that demand for AI-powered memory chips would spill over into consumer electronics, India offers the strongest evidence yet that disruption is coming, with rising mobile phone prices reshaping the smartphone market.
The memory chips in question, or RAM and storage components, are the same ones that tech giants need by the truckload to build AI data centers. Manufacturers such as Samsung, SK Hynix, and Micron are shifting production capacity to high-bandwidth memory, a specialized chip used in AI accelerators. This is because it is much more profitable per wafer than standard memory used in mobile phones and laptops, leaving less capacity and higher costs for everyday consumer electronics.
According to market research firm Counterpoint Research, in India, the world’s second-largest smartphone shipment market after China, smartphone shipments in the April-June quarter fell 10% from the same period last year, with rising memory costs pushing up device prices, resulting in the largest decline in June for the first time in six years.
The impact was more pronounced in India than in China, where smartphone shipments fell by just 2% in the second quarter, Counterpoint said. India has been hit harder as about 60% of the smartphone market is in the sub-₹20,000 ($210 and below) segment, with rising memory costs having the biggest impact on prices, Tarun Pathak, the company’s vice president of research, told TechCrunch.
India has become a prominent market for global smartphone brands in recent years. The South Asian country of more than 1.4 billion people and more than 700 million smartphone users is leading the way in consumer demand in a price-sensitive market, driving changes in purchasing patterns that are being closely watched by device makers, chip suppliers and investors tracking the broader health of the AI supply chain.
Pathak told TechCrunch that consumers are unlikely to abandon smartphones completely. But while many are expected to delay upgrades and extend their replacement cycles to about four years from about 3.5 years previously, premium brands such as Apple and Samsung remain better protected from the economic slowdown.
This uneven impact is already reshaping competition among smartphone manufacturers. According to Counterpoint, Samsung was the only major smartphone brand to increase its shipments in India in the second quarter, with sales up 2% year-on-year. In contrast, Apple’s shipments were down 3%. However, this drop primarily reflects supply constraints and inventory shortages that limit the number of iPhones Apple can ship.
Prachir Singh, senior analyst at Counterpoint Research, told TechCrunch that it turns out that consumers buying high-end smartphones are less sensitive to price increases because financing makes expensive devices more affordable.
The pain was most severe at the lower end of the market. Shipments in the under-15,000-pound (under-$150) segment were down 45% year over year, according to Counterpoint. With Chinese brands heavily exposed to entry-class and mid-tier smartphones, their combined market share fell to its lowest level for the second calendar quarter since 2020.
The harsh economic situation is also prompting a change in strategy. Chinese smartphone brand OnePlus announced this week that after careful evaluation, it will suspend new product launches in Europe and North America, while maintaining its India operations. According to Counterpoint data shared with TechCrunch, China accounted for 74% of OnePlus’ global smartphone shipments to distributors and retailers in the first quarter, up from 59% a year earlier, while India’s share fell to 19% from 30%.
In other words, OnePlus is retreating into markets where it can still make a profit and making concessions elsewhere. This pattern is likely to be repeated at other budget brands as profit margins shrink.
In fact, Pathak told TechCrunch that running multiple sub-brands only makes sense if each brand sells enough volume to cover their shared costs, and the math stops working when profit margins get this thin. “Sub-brands typically have overlap, resource sharing, and require a minimum base to justify marginal profits. Profitability is the key determinant of market operation,” he said.
Consumers feel pressured
This pressure on brands extends directly to the people who buy mobile phones. Kiranjeet Kaur, associate research director for mobile phone research at IDC, said the Indian smartphone market is transitioning from volume-driven growth to value-driven growth, meaning that fewer phones are being sold overall, but revenue per unit is increasing as rising component costs make low-cost smartphones increasingly uneconomical.
Rising component costs are already trickling down to consumers. Pathak said smartphone prices in India have increased by 4% to 68%, depending on the model, and as prices rise, consumers are moving to more expensive devices, delaying upgrades, or turning to the second-hand market.
Meanwhile, funding has become “central to affordability,” Kaul told TechCrunch. He added that brands and retailers are also stocking up ahead of the holiday season to contain costs before component prices rise further.
IDC also expects smartphone shipments in India to decline by double digits in the second quarter, Kaur said, which is larger than the 4.1% decline in the first quarter and the 5.3% decline in the previous quarter. However, the company said its estimates have not yet been finalized.
Kaul told TechCrunch that memory shortages and high smartphone prices are likely to persist until at least the end of 2027, but the pace of price increases should slow as consumers gradually adapt to the new normal of high prices.
“For Indian consumers, it’s a double whammy as a weaker currency makes imports more expensive, further increasing margin pressure on market players and passing those costs on to consumers,” Kaul said.
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