Key facts
- India's smartphone shipments fell 10% year-over-year in Q2, the steepest June-quarter decline in six years.
- Rising costs for RAM and storage chips, diverted to AI data centers, are increasing handset prices.
- The sub-₹20,000 ($210) price segment in India has been most affected, with sub-₹15,000 shipments down 45%.
- Consumers are expected to delay upgrades, extending replacement cycles to around four years.
- OnePlus is ceasing new product launches in Europe and North America to focus on profitable markets like India.
- Smartphone prices in India have increased between 4% and 68%.
India's smartphone market is facing a significant downturn, with shipments falling 10% year-over-year in the second quarter, marking the steepest decline in six years. This disruption is attributed to the increasing demand for memory chips, such as RAM and storage components, driven by the burgeoning AI sector. Manufacturers like Samsung, SK Hynix, and Micron are prioritizing the production of high-bandwidth memory for AI accelerators due to higher profitability, leading to reduced capacity and increased costs for standard memory chips used in consumer electronics.
The impact is particularly acute in India, the world's second-largest smartphone market, where approximately 60% of sales occur in the sub-₹20,000 ($210) price segment. The rise in memory costs has disproportionately affected these budget-friendly devices, pushing up overall handset prices. Consequently, consumers are expected to delay their upgrade cycles, extending them from an average of 3.5 years to around four years.
This shift is reshaping the competitive landscape. While premium brands like Apple and Samsung are relatively insulated, Chinese brands, heavily reliant on the entry- and mid-tier segments, have seen their combined market share drop to its lowest in two years. OnePlus has announced a strategic retreat from Europe and North America to focus on profitable markets, a move analysts suggest may be emulated by other budget-focused brands.
The price increases, ranging from 4% to 68% depending on the model, are forcing consumers to either opt for more expensive devices, postpone purchases, or turn to the secondhand market. Financing has become crucial for affordability, and brands are building inventory ahead of the festive season to mitigate further component price hikes. IDC forecasts a double-digit decline in India's smartphone shipments for the second quarter, with memory shortages and elevated prices anticipated to persist until at least the end of 2027.