The artificial intelligence boom has begun to exact a visible toll on the world’s smartphone industry — and Indian buyers are squarely in the line of fire.
While India-specific figures are not yet available, China’s three largest Android makers — Xiaomi, Oppo and Vivo — have slashed their 2026 global shipment targets by as much as 30%, according to a Nikkei Asia report this week, as memory chips are diverted wholesale to Ai data centres.
In India, the crisis was already visible and is expected to worsen further. Smartphone shipments in India fell 3% year-on-year in the January–March quarter, the market’s weakest showing in six years, with more than 80 models seeing average price increases of about 15% as memory costs surged, according to Counterpoint Research.
The future looks dim as research firm Gartner expects the memory crunch to shrink global smartphone shipments by 8.4% in 2026 even as average selling prices rise 13% over 2025 levels; PC shipments, it projects, will fall harder, by 10.4%, with prices up 17%. Gartner does not expect meaningful pricing relief before the end of 2027, given how long new memory capacity takes to build.
Structural Squeeze
The root of the squeeze is structural. DRAM and NAND flash prices have surged globally as cloud giants building AI infrastructure lock up memory production through long-term supply agreements, pushing smartphone makers to the back of the allocation queue.
Premium players have responded by simply passing the bill on: Apple recently raised prices across several MacBook and iPad models after saying it could no longer absorb higher memory costs, and Microsoft and HP have followed similar playbooks. But for brands whose volumes sit in the ₹15,000–30,000 band, that route is largely closed.
“Brands in the mid-market segment have managed to pass on only part of the rising input costs. The segment they cater to is more price conscious and will not absorb a significant price increase like those in the premium segment can,” Faisal Kawoosa, chief analyst at Techarc, said.
A Techarc study found that while more than 90% of buyers preferred new smartphones over refurbished devices, they remained largely uncompromising on price. Kawoosa expects Vivo, Xiaomi and Oppo to rationalise portfolios this year — fewer launches, fewer variants — alongside the trimmed shipment expectations.
Hardware Shrinkflation
The result, analysts say, is a distinctly smartphone-flavoured shrinkflation: headline prices are preserved while hardware is quietly pared back. Manufacturers are reusing previous-generation chipsets, dropping higher RAM and storage variants, trimming camera resolutions and tweaking build materials and audio components — even as they protect the features buyers notice most, such as larger batteries, AI capabilities and ecosystem integration.
“The premium brands benefit from stronger brand equity and higher profitability. At the same time, the industry is also witnessing a form of shrinkflation, where OEMs maintain similar price points but quietly optimise hardware,” said Prachir Singh, senior analyst at Counterpoint Research.
The pain is sharpest at the bottom of the market. Memory accounts for a larger share of the bill of materials in mid-range devices than in flagships, noted Upasana Joshi, senior research manager at IDC India and South Asia, making the cost shock disproportionately heavy. “In India’s budget segment, phones under ₹20,000, OEMs have almost no margin left to absorb the shock. Most are passing the cost directly to consumers,” she said, adding that brands are also streamlining portfolios, cutting pre-installed applications and making selective specification trade-offs to manage costs.
Instead of investing in expensive hardware upgrades — higher-resolution cameras, faster processors, bigger memory configurations — companies are leaning on software optimisation and AI-led enhancements to preserve the specifications-to-price ratio. The irony is not lost on the industry: the same AI wave that brands are racing to put on their spec sheets is the force hollowing those spec sheets out.
Samsung may be relatively better placed than several Chinese rivals, Kawoosa said, because its stronger premium portfolio gives it greater pricing flexibility — and, as one of the world’s largest memory makers, it profits from the very tightness squeezing its handset rivals; its Seoul-listed shares rose over 3% this week on the back of its AI-cycle investment bets.
Industry executives see no quick unwinding. “The advances we’re seeing with AI right now are happening so fast that there are real strains on the system. Energy is one issue. Memory prices are another,” said John T Kelley, vice-president and CES show director at the Consumer Technology Association. Software optimisation can soften the blow, he said, but expanding memory manufacturing capacity requires substantial investment and years to build — meaning the supply imbalance is unlikely to ease quickly.
For Indian consumers, the near-term arithmetic is simple: fewer new models on shelves, higher stickers on the ones that launch, and phones that look the same on the outside while carrying a little less inside.