AI-driven memory crunch hits India's smartphone market

Rising memory chip costs and AI demand disrupt consumer electronics

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's smartphone market sees significant decline

• Smartphone shipments fell 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.
• India has been hit harder than China, where smartphone shipments fell just 2% in Q2, according to Counterpoint. India has been a prominent market for global smartphone brands for several years, with about 60% of its smartphone market concentrated in the sub-₹20,000 (under $210) segment.
• Consumers are unlikely to abandon smartphones altogether, but many are expected to delay upgrades, stretching replacement cycles to around four years from about 3.5 years previously.

Competition and market shifts

• 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 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.
• The pain has been most acute at the lower end of the market, with shipments in the sub-₹15,000 (under $150) segment falling 45% from a year earlier, Counterpoint said.

Brands adapt to the new landscape

• 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 TechCrunch 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%.
• 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, Tarun Pathak, the firm's vice president of research, told TechCrunch.

Shift to value growth

• 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.
• 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.

Impact on consumers

• Financing has become "central to affordability," Kiranjeet Kaur, associate research director for mobile phones research at IDC, told TechCrunch.
• Brands and retailers were also building inventory ahead of the festive season to lock in lower costs before further increases in component prices.
• IDC 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.