AI Memory Demand Is Making Sub-$100 Smartphones Disappear in 2026

AI infrastructure is reshaping the smartphone business through an unlikely bottleneck: memory. Strong demand for high-bandwidth memory (HBM) and server DRAM has shifted supplier attention toward higher-value data-center products, tightening the supply of conventional memory used in phones. The result is a 2026 handset market with fewer entry-level devices, higher prices and a stronger incentive for manufacturers to sell premium models. 1112

Why the sub-$100 phone market has fallen so sharply

The economics of an ultra-low-cost phone leave little room for a component shock. In 2025, 173 million smartphones priced below $100 shipped globally. In the second quarter of 2026, shipments in that segment fell almost 60% from a year earlier, according to IDC data reported by CNBC. 7

The key issue is the share of a cheap phone’s cost that is now tied up in memory. Omdia estimates that memory represents almost 60% of the bill of materials for smartphones priced below $200. When DRAM and storage prices rise, a vendor selling a $100 phone has few workable choices: accept a much lower margin, reduce specifications, raise the retail price or stop offering the model. 7

That pressure is not distributed evenly across the market. Counterpoint found that a typical low-end phone using 6GB of LPDDR4X memory and 128GB of eMMC storage would see its total bill of materials rise 25% quarter over quarter in the first quarter of 2026, assuming other component costs stayed stable. 40

How AI demand reaches the phone aisle

HBM is a specialized memory used with AI accelerators, while server DRAM supports the broader data-center buildout. Both offer memory suppliers a more attractive market than commodity mobile memory. Counterpoint identifies capacity reallocation toward AI-focused HBM and server DRAM as the primary driver of the 2026 memory supply crisis, with lower-end phone makers facing particularly acute pressure. 11

The price moves have been unusually large. Counterpoint reported mobile DRAM prices up more than 50% quarter over quarter and NAND flash prices up more than 90% in the first quarter of 2026. 40 Omdia later said average DRAM and NAND prices rose more than 80% quarter over quarter in that quarter, with additional increases in the second quarter. 35

This is why the shortage matters more than a normal parts-cost increase. Memory is essential to every smartphone, but its higher share of a budget device’s cost means the entry tier loses viability first.

A global market moving from volume to value

Forecasts have become more pessimistic as the shortage has persisted. IDC’s August outlook projects worldwide smartphone shipments will decline 16.7% in 2026 to just over 1 billion units. It attributes the downturn to a memory shortage that began in late 2025 and says NAND and DRAM costs were up more than 300% year over year. 2

At the same time, handset makers are pushing price increases and selling a richer mix of devices. Omdia forecasts that global smartphone average selling price will increase from $467 in 2025 to $565 in 2026—a 21% rise. 35 That figure reflects both component-cost pass-through and a strategic shift away from lower-margin models.

For buyers, the practical effect is simple: the cheapest new smartphones are becoming harder to find, and the remaining options may offer less memory or storage for the price than earlier models.

Why Samsung is relatively insulated—but not immune

Samsung is exposed to both sides of the memory cycle. Its Device Solutions semiconductor division benefits from AI-driven memory demand, while the company’s phone business must absorb higher component costs.

Samsung reported KRW 89.2 trillion in operating profit for its Device Solutions division in the second quarter of 2026. In the same quarter, its MX and Networks businesses reported an operating loss of KRW 0.7 trillion, despite revenue growth. 24 The contrast shows why vertical integration is an advantage at the company level without making handset profitability painless.

Samsung’s scale, semiconductor business and premium brand give it more room than many lower-cost competitors to emphasize higher-value phones rather than compete solely for the cheapest Android sales. The broader pattern is clear: manufacturers with stronger purchasing power, premium product lines or component operations are better positioned to manage the shortage than vendors dependent on thin-margin entry devices.

Chinese brands are also reducing exposure to the low end

The same portfolio shift is visible at Xiaomi. Sub-$100 devices accounted for 27.7% of Xiaomi’s global shipments in the first half of 2025; a year later, that share had fallen to 11.2%. 7

That does not necessarily mean demand for affordable phones has disappeared. Rather, the component economics have made it harder to serve that demand with a new device at the former price point. For Chinese manufacturers, selling more premium phones and reducing low-margin models is increasingly a financial necessity, not merely a branding strategy.

Why a quick return to cheap phones is unlikely

Memory supply cannot be expanded overnight. New fabs require years of construction, equipment installation, qualification and production ramp-up. Samsung has said it expects the global chip shortage to extend into 2028. 17 IDC likewise expects memory prices to continue rising until at least 2028, even as vendors adjust to a structurally higher cost base. 2

The eventual easing of supply should reduce the pace of cost inflation. It does not guarantee a return to the previous era of sub-$100 smartphones. Once vendors have reduced low-end portfolios and consumers have become accustomed to higher price points, the industry has a commercial incentive to preserve a more premium mix.

The central takeaway is not that AI has made smartphones less important. It has changed which smartphones make economic sense to build. In 2026, scarce memory has become a competitive advantage for suppliers and a decisive constraint for phone makers—especially those trying to sell at the bottom of the market. 1112