Major memory-chip makers’ pivot toward high-bandwidth memory for AI accelerators is creating a ripple effect through the consumer electronics market. As production capacity moves to more profitable AI-focused chips, supply of standard RAM and storage used in phones has tightened and prices have risen — a squeeze that hit India especially hard, contributing to a 10% drop in smartphone shipments in the April–June quarter, according to market researcher Counterpoint.
Chipmakers prioritize HBM as consumer memory tightens
Suppliers such as Samsung, SK Hynix and Micron have been reallocating wafer capacity to high-bandwidth memory (HBM), the specialized modules used by AI accelerators. HBM commands substantially higher margins per wafer than conventional mobile and laptop memory, prompting manufacturers to favour it. The trade-off: less production capacity for the RAM and flash storage that power everyday devices, and an upward pressure on component prices for consumer electronics.
That supply-side shift is a direct link between the booming AI infrastructure market and more familiar consumer markets. With memory suppliers chasing AI demand, handset makers face stepped-up cost pressures that are passing through to retail prices.
India’s market feels a disproportionate impact
India, a country of more than 1.4 billion people and over 700 million smartphone users, has been particularly vulnerable because of its large price-sensitive segment. Counterpoint’s data shows smartphone shipments in India fell 10% year-over-year in Q2 (April–June), the steepest June-quarter decline in six years. By contrast, shipments in China dipped only 2% over the same period, per Counterpoint.
Analysts point to the structure of India’s market as a key factor. Roughly 60% of smartphones sold in India are in the sub-₹20,000 (under $210) segment, where higher memory costs most heavily influence final prices. As a result, lower-cost devices have become less economical to produce and sell, squeezing volumes at the entry level.
Who is winning and who is losing
The uneven pressure on pricing has reshuffled competition. Samsung was the sole major vendor to post year-over-year shipment growth in India in Q2, with volumes rising 2%, according to Counterpoint. Apple saw shipments decline about 3%, a fall the firm attributes largely to supply constraints and inventory shortages rather than weaker demand.
The pain is concentrated at the bottom of the market. Counterpoint reports shipments in the sub-₹15,000 (under $150) tier plunged 45% year-over-year. Chinese brands, which rely heavily on entry and mid-tier segments, saw their combined market share fall to its lowest level for a second consecutive calendar quarter since 2020.
The pressure on margins is also prompting strategic retrenchment. OnePlus said it will halt new product launches in Europe and North America while maintaining its India business following an internal reassessment. Counterpoint data shared with the reporting outlet shows OnePlus’ shipments shifted toward China, which accounted for 74% of its global distributor and retailer shipments in Q1, up from 59% a year earlier; India’s share dropped to 19% from 30%.
Consumers and brands adjust to higher prices
Industry analysts say consumers are unlikely to abandon smartphones, but they expect replacement cycles to stretch. Counterpoint estimates many users will delay upgrades, moving average replacement intervals from roughly 3.5 years toward around four years, while premium brands remain relatively insulated because buyers are less price-sensitive and financing options help affordability.
Market research firm IDC characterizes the current phase as a shift from volume-led growth to value-led growth: fewer units sold overall, but higher revenue per device as average selling prices rise. Counterpoint notes that smartphone prices in India have increased between 4% and 68%, depending on the model, and consumers are responding by deferring purchases, opting for higher-end devices via financing, or turning to used phones.
Brands and retailers are also adapting operationally. Many are building inventory ahead of the festive season to lock in current component costs, while some reassess the viability of sub-brands and overlapping product lines when margins thin. Industry analysts warn that sub-brands only make financial sense when volumes are large enough to absorb shared costs; with tighter margins, consolidation and market exits become more likely.
Outlook: supply tightness to persist into 2027
IDC expects memory shortages and elevated smartphone prices to last at least until the end of 2027, although the pace of price increases may moderate as consumers and channel partners adjust to the new pricing environment. An additional headwind for India is currency weakness, which raises import costs and compounds margin pressure for device makers — pressure that tends to be passed on to buyers.
The episode highlights how supply decisions made to service AI data-centre demand are having concrete consequences for mainstream technology markets. As chipmakers chase higher-margin HBM wafers for accelerators, phone makers and consumers — especially in price-sensitive markets such as India — are left facing fewer options and higher costs.
Source: TechCrunch AI