Inexpensive Android phones face an expensive problem.
The pressure is on smartphone makers, especially those competing in the sub-$400 segment, amid rising DRAM and NAND prices. According to research from Omdia, memory costs now account for nearly 60% of the total bill of materials (BOM) for smartphones priced below $400, up from around one-third in late 2025.
The impact is even greater for the cheapest devices. Phones priced below $99 now see memory account for more than 64% of component costs, leaving manufacturers with little room to absorb further increases.
Omdia analyst Zaker Li said rising memory costs have become a major burden for mid-to-low-end smartphones, forcing companies to rethink how they build affordable devices
The result could be a major contraction in the budget phone market. Omdia forecasts global shipments of smartphones priced below $400 will fall by more than 22% in 2026, contributing to a projected 12% decline in the overall smartphone market.
Why cheaper phones are taking the biggest hit
The problem is not simply that memory prices are rising; it is that budget phones have far less financial flexibility.
Premium smartphones can incur higher component costs, but low-cost phones are built on extremely tight margins. Cutting prices elsewhere, such as on displays, cameras, or connectivity components, only goes so far.
Manufacturers are now looking to reduce costs by switching from higher-end displays to cheaper alternatives, simplifying camera setups, or using older-generation processors instead of newer chips. For example, Omdia said some vendors are returning to LTPS OLED panels instead of LTPO displays in certain models.
Companies might also opt for reducing camera complexity by using fewer sensors or smaller image sensors. These steps can potentially save several dollars per device.
Android phones may get more expensive or less capable
The pressure is already changing how companies approach new devices. Instead of adding more RAM and upgrading every major component each year, manufacturers aim to prioritize keeping prices manageable, so that released phones will have older processors, fewer cameras, or less memory than previous generations.
Some analysts warn that the industry could reverse years of progress, where cheaper phones delivered increasingly premium features. Buyers used to 8GB or 12GB RAM might see manufacturers return to lower configurations.
To protect thin profit margins, Omdia said brands including Transsion, OPPO, vivo, Honor, and Xiaomi are opting for price increases. However, budget consumers are typically more sensitive to price hikes, creating a difficult balancing act.
AI demand is reshaping the memory market
A key driver behind the shortage is the explosive demand for memory used in AI infrastructure. Chipmakers prioritized higher-margin products such as high-bandwidth memory (HBM) for AI data centers, reducing available capacity for older memory products used in smartphones.
That supply shift created a difficult environment for phone makers relying on lower-cost memory components.
While cheaper devices struggle, higher-end phones are expected to remain more resilient. Omdia forecasts smartphones priced above $400 will grow 5.7% in 2026, driven by stronger margins and consumers less affected by price increases.
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What buyers may notice
The shift could have the biggest impact in emerging markets, where affordable Android phones remain the primary means of internet access for millions of people. If manufacturers reduce their presence in the sub-$400 category, consumers may face fewer choices, slower hardware improvements, and higher prices.
The trend also highlights how changes in the semiconductor industry can ripple into consumer electronics. As memory suppliers prioritize higher-value products, smartphone makers must rethink how they balance affordability, performance and profitability.
The bigger picture
The current surge in memory prices exposes the fragile economics of budget smartphones. Premium manufacturers have enough pricing flexibility to absorb higher component costs or adjust specifications without dramatically affecting demand. Budget phone makers do not have that luxury.
If memory prices remain elevated, the market could shift away from the rapid value improvements that defined Android devices over the past decade. In the near term, buyers looking for the best value might find it in discounted previous-generation phones rather than newly launched budget models; a trade-off that could become more common until component costs stabilize.
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