Key facts
- Memory costs now account for nearly 60% of the total bill of materials for smartphones under $400.
- For phones priced below $99, memory costs represent over 64% of the bill of materials.
- Omdia predicts a 12% overall decline in the global smartphone market for the year.
- Shipments of smartphones priced below $400 are expected to fall by 22% year-over-year.
- Shipments of smartphones priced above $400 are forecast to increase by 5.7%.
The market for budget smartphones is facing a significant contraction due to escalating memory costs, according to research from Omdia. Surging prices for RAM, driven in part by demand from the AI boom, are making low-end devices increasingly unprofitable. Memory costs now constitute a substantial portion of the total bill of materials for smartphones in the sub-$400 and sub-$99 price tiers. This situation is pressuring manufacturers like OPPO and Xiaomi to increase retail prices, which is expected to dampen demand among budget-conscious consumers. Omdia forecasts a 12% overall decline in the global smartphone market this year, with a particularly sharp 22% year-over-year drop in shipments for phones under $400, while higher-priced models are projected to grow. Companies like Apple and Microsoft have already implemented price increases on other electronics due to similar cost pressures, and retailers anticipate further price hikes for smartphones and laptops later in the year.