The global surge in artificial intelligence (AI) is set to have a profound impact on the smartphone market, particularly for budget models. As AI data centers consume a larger share of memory production, affordable smartphones may become increasingly scarce or expensive by 2027.
AI’s Growing Demand for Memory
According to industry estimates, AI computing hardware currently utilizes over 50% of the available DRAM wafer capacity, with projections suggesting this could rise to over 60% next year. This shift is likely to create intense competition among smartphone manufacturers for a dwindling supply of mobile memory, forcing them to either hike prices or lower specifications.
Threat to Budget Smartphones
Smartphones priced below 1,500 yuan (approximately $220) could become increasingly difficult to find in 2027. Memory and storage components are expected to account for up to 60% of the manufacturing costs of these affordable devices. As a result, manufacturers may have little room to cover other essential components like processors, displays, and batteries while still turning a profit.
Market Dynamics and Future Projections
The ongoing memory crisis is already affecting the broader smartphone market. Research firm IDC forecasts a 12.9% decline in global smartphone shipments in 2026, with the average selling price expected to rise by 14% to a record $523. While Chinese suppliers may offer some relief, geopolitical factors complicate reliance on these sources for manufacturers outside China.
As the demand for AI infrastructure continues to grow, the shortage of affordable smartphones may become a lasting issue, potentially pushing devices that once cost around $200 into higher price brackets.
