India’s smartphone market shaken by AI memory crunch

Months after analysts first cautioned that surging AI demand for memory chips would eventually disrupt consumer electronics, India has emerged as the clearest example yet that the shift is already underway. Rising handset prices are now reshaping the country’s smartphone landscape in ways that signal broader changes ahead.

The memory components at the center of this disruption are the same RAM and storage chips that technology giants need in massive volumes to build AI data centers. Manufacturers including Samsung, SK Hynix, and Micron have redirected production capacity toward high-bandwidth memory used in AI accelerators, which generates far greater profit per wafer than standard memory for phones and laptops. This reallocation has tightened supply and driven up costs for everyday consumer devices.

India, the world’s second-largest smartphone market by shipments after China, saw shipments drop 10% year-over-year in the April-June quarter, according to Counterpoint Research. That marks the steepest June-quarter decline in six years, as higher memory costs pushed up handset prices.

The impact has been more severe in India than in China, where smartphone shipments fell just 2% in Q2. Tarun Pathak, Counterpoint’s vice president of research, told TechCrunch that India has been hit harder because roughly 60% of its smartphone market falls in the sub-₹20,000 (under $210) segment, where memory cost increases have had the greatest effect on pricing.

India has long been a key market for global smartphone brands. With more than 1.4 billion people and over 700 million smartphone users, the South Asian nation serves as a bellwether for consumer demand in price-sensitive markets. Shifts in buying patterns there are closely monitored by device makers, chip suppliers, and investors tracking the broader health of the AI supply chain.

Pathak noted that consumers are unlikely to abandon smartphones entirely, but many are expected to delay upgrades, stretching replacement cycles to around four years from about 3.5 years previously. Premium brands such as Apple and Samsung are better positioned to weather the slowdown.

The uneven impact is already reshaping competition among smartphone makers. Samsung was the only major 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 decline largely reflected supply constraints and inventory shortages limiting how many iPhones it could deliver.

Consumers buying higher-end smartphones have proven less sensitive to price increases, with financing options making expensive devices more accessible, said Prachir Singh, a senior analyst at Counterpoint Research.

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 reported. Because Chinese brands are heavily exposed to entry- and mid-tier smartphones, their combined market share dropped to its lowest level for a second calendar quarter since 2020.

Tougher economics are also prompting strategic shifts. This week, Chinese smartphone brand OnePlus announced 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%.

OnePlus is effectively 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.

Pathak told TechCrunch that running several sub-brands only makes sense if each sells enough volume to cover shared costs, and that calculation 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 consumers. 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 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. As prices climb, consumers are either moving to higher-priced devices, delaying upgrades, or turning to the secondhand market.

Financing has become central to affordability, Kaur added. Brands and retailers are 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, Kaur said, though she noted the firm’s estimates were not yet finalized.

Kaur told TechCrunch that memory shortages and elevated smartphone prices are 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.