India's smartphone market faces a significant slowdown as rising memory chip costs, driven by AI demand, lead to higher prices and reduced shipments.
Washington DC, United States Jul 18, 2026 ALN: Months after analysts warned that AI-driven demand for memory chips would ripple through consumer electronics, India is providing the strongest evidence yet that the disruption has arrived, with rising handset prices reshaping the smartphone market.
The memory chips in question — RAM and storage components — are the same ones tech giants need by the truckload to build AI data centers. Manufacturers like Samsung, SK Hynix, and Micron have been shifting production capacity toward high-bandwidth memory, the specialized chips used in AI accelerators, because they’re much more profitable per wafer than the standard memory used in phones and laptops — leaving less capacity, and driving up costs, for everyday consumer electronics.
India, the world’s second-largest smartphone market by shipments after China, saw smartphone shipments fall 10% year-over-year in the April-June quarter, according to market research firm Counterpoint Research, marking the steepest June-quarter decline in six years as higher memory costs pushed up handset prices.
The impact has been more pronounced in India than in China, where smartphone shipments fell just 2% in Q2, according to Counterpoint. India has been hit harder because about 60% of its smartphone market is concentrated in the sub-₹20,000 (under $210) segment, where higher memory costs have had the biggest impact on prices, Tarun Pathak, the firm’s vice president of research, told .
India has been a prominent market for global smartphone brands for several years. The South Asian nation, home to more than 1.4 billion people and over 700 million smartphone users, has become a bellwether for consumer demand in price-sensitive markets, making shifts in buying patterns closely watched by device makers, chip suppliers, and investors tracking the broader health of the AI supply chain.
Pathak told that consumers are unlikely to abandon smartphones altogether. However, many of them are expected to delay upgrades, stretching replacement cycles to around four years from about 3.5 years previously, while premium brands such as Apple and Samsung remain better insulated from the slowdown.
The uneven impact is already reshaping competition among smartphone makers. Samsung was the only major smartphone brand to post shipment growth in India in Q2, with volumes rising 2% year-over-year, according to Counterpoint. Apple, by contrast, saw shipments fall 3% — though that dip largely reflected supply constraints and inventory shortages limiting how many iPhones Apple could deliver.
Consumers buying higher-end smartphones have proved less sensitive to price increases, with financing making expensive devices more affordable, Prachir Singh, a senior analyst at Counterpoint Research, told .
The pain has been most acute at the lower end of the market. Shipments in the sub-₹15,000 (under $150) segment fell 45% from a year earlier, Counterpoint said. Because Chinese brands are heavily exposed to entry- and mid-tier smartphones, their combined market share fell to its lowest level for a second calendar quarter since 2020.
The tougher economics are also prompting strategic shifts. This week, Chinese smartphone brand OnePlus said it would stop launching new products in Europe and North America, while maintaining its India business, following what it described as a careful assessment. Counterpoint data shared with showed China accounted for 74% of OnePlus’ global smartphone shipments to distributors and retailers in Q1, up from 59% a year earlier, while India’s share fell to 19% from 30%.
In other words, OnePlus is retreating to markets where it can still turn a profit and ceding ground elsewhere — a pattern likely to repeat across other budget-focused brands as margins tighten.
Indeed, Pathak told that running several sub-brands only makes sense if each one sells enough volume to cover shared costs, and that math stops working once margins get this thin. “Sub-brands normally have overlaps and shared resources, and you need a minimum base to justify the cut-throat margins. Profitability is the key to deciding market operations,” he said.
That pressure on brands is trickling straight down to the people buying their phones. Kiranjeet Kaur, associate research director for mobile phones research at IDC, said the Indian smartphone market is shifting from volume-led growth to value growth — meaning fewer phones are being sold overall, but each one generates more revenue — as higher component costs make lower-priced smartphones increasingly uneconomical.
The higher component costs are already filtering through to consumers. Smartphone prices in India have risen by between 4% and 68%, depending on the model, Pathak said, and as prices rise, consumers are either moving to higher-priced devices, delaying upgrades, or turning to the secondhand market.
Financing has meanwhile become “central to affordability,” Kaur told . She added that brands and retailers were also building inventory ahead of the festive season to lock in lower costs before further increases in component prices.
IDC also expects India’s smartphone shipments to decline by double digits in Q2, a steeper fall than the 4.1% decline in the first quarter and the 5.3% drop in the previous quarter, Kaur said. However, she noted the firm’s estimates were not yet finalized.
Kaur told that memory shortages and elevated smartphone prices were likely to persist until at least the end of 2027, although the pace of price increases should moderate as consumers gradually adjust to higher prices becoming the new normal.
“For Indian consumers, it is a double whammy as the weaker currency makes imports costlier, which has added to margin pressures for the market players, and they are passing on the cost to the consumer,” Kaur said.
The current situation in India's smartphone market is a complex interplay of global supply chain dynamics, local consumer behavior, and economic conditions. The rise of artificial intelligence has created a surge in demand for memory chips, which are crucial for the functioning of AI systems. This spike in demand is not only affecting the production of high-end devices but is also having a cascading effect on the prices of entry-level smartphones, which are essential for a significant portion of the Indian population.
As the cost of memory chips increases, manufacturers are faced with the challenge of balancing profitability with consumer accessibility. The shift towards AI-driven technology means that manufacturers are prioritizing high-bandwidth memory for AI applications, further squeezing the supply available for consumer electronics. This transition has led to a significant increase in prices across the board, particularly impacting budget-conscious consumers who rely on affordable smartphones for connectivity and access to information.
The economic implications of this shift are profound. With a substantial portion of the Indian population relying on smartphones for daily activities, from communication to education and online services, the rising costs could lead to increased digital inequality. Consumers in lower-income brackets may find themselves unable to afford the latest devices, potentially widening the gap between those who can and cannot access technology.
Moreover, the trend of delaying upgrades could result in older devices remaining in use for longer periods, which may have implications for software updates, security, and overall user experience. As consumers hold onto their devices longer, manufacturers may face challenges in maintaining customer engagement and loyalty, as users become less inclined to invest in new products.
In response to these challenges, smartphone manufacturers may need to reevaluate their strategies. This could involve focusing on creating more value-driven products that offer competitive features at lower price points, or exploring innovative financing options that make higher-priced devices more accessible to a broader audience. Brands may also need to invest in marketing strategies that emphasize the long-term value of their products, rather than just the upfront cost.
The situation in India serves as a microcosm of broader trends in the global smartphone market, where the interplay between technological advancement and consumer affordability is becoming increasingly critical. As manufacturers navigate these challenges, the outcome could shape the future landscape of the smartphone industry, not just in India but globally, as companies adapt to the realities of a rapidly changing technological environment.
Ultimately, the ongoing shifts in India's smartphone market highlight the need for a balanced approach that considers both innovation and accessibility. As the demand for AI-driven technologies continues to grow, stakeholders across the industry must work collaboratively to ensure that the benefits of technological advancements are shared equitably, allowing all consumers to participate in the digital economy.
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