Growing demand for high-bandwidth memory used in AI data centers has prompted makers to reallocate production away from standard RAM and storage used in phones. Manufacturers such as Samsung, SK Hynix and Micron are shifting capacity toward AI-grade memory, which yields higher profit per wafer, reducing the supply of conventional memory for consumer electronics and pushing up prices.
Timing and key figures
According to Counterpoint Research, India — the world's second-largest smartphone market by shipments after China — saw smartphone shipments fall 10% year-over-year in the April–June quarter, the steepest June-quarter decline in six years. By comparison, smartphone shipments in China fell only 2% in Q2.
India is particularly exposed because roughly 60% of its market sits in the sub-₹20,000 (under $210) segment, where higher memory costs have the greatest impact on retail prices, said Tarun Pathak, Vice President of Research at Counterpoint.
Who is affected and how
- Premium brands such as Apple and Samsung have been better insulated from the slowdown; wealthier buyers are less price-sensitive and financing options make costlier devices more attainable.
- Samsung was the only major brand to report shipment growth in India in Q2, with volumes up 2% year-over-year, according to Counterpoint.
- Apple’s shipments fell 3%, mostly reflecting supply constraints and inventory shortages that limited deliveries.
The largest pain has been at the low end: shipments in the sub-₹15,000 (under $150) segment fell 45% year-over-year. Chinese brands, which have heavy exposure in the entry and mid tiers, saw their combined market share drop to its lowest level for a second calendar quarter since 2020.
Strategic shifts among manufacturers
Tighter margins are prompting companies to refocus on profitable markets. OnePlus said this week it would stop launching new products in Europe and North America while maintaining its India business after a careful assessment. Counterpoint data shared with TechCrunch showed that in Q1, 74% of OnePlus’ global smartphone shipments to distributors and retailers went to China, up from 59% a year earlier, while India’s share fell from 30% to 19%.
Tarun Pathak noted that operating multiple sub-brands only makes sense if each brand sells sufficient volume to cover shared costs; when margins become very thin, that equation breaks down.
Consumer behaviour and outlook
Kiranjeet Kaur, Associate Research Director for Mobile Phones Research at IDC, said India’s market is shifting from volume-led growth to value growth — fewer phones are being sold overall, but each sale generates more revenue — because higher component costs are making low-priced smartphones uneconomical.
Counterpoint estimates that smartphone prices in India have risen between about 4% and 68%, depending on the model. As prices increase, consumers are either moving to higher-priced devices, delaying upgrades (with replacement cycles stretching from about 3.5 years to around 4 years), or turning to the secondhand market. Financing has become central to affordability, Kaur added, and brands and retailers are building inventory ahead of the festive season to lock in current costs before further increases.
IDC expects India’s smartphone shipments to decline by double digits in Q2, a steeper drop than the 4.1% decline in Q1 and the 5.3% fall in the previous quarter, though those estimates were not yet final. Kaur warned that memory shortages and elevated smartphone prices are likely to persist until at least the end of 2027, even if the pace of price increases slows as consumers adjust to higher price levels. She also pointed out that a weaker local currency raises import costs, adding to margin pressure that manufacturers pass on to consumers.
Why this matters
Because India is a large, price-sensitive market and an important battleground for global smartphone brands, shifts in memory production driven by AI demand serve as an early indicator of broader stress in the consumer electronics supply chain. How manufacturers, chip suppliers and buyers adapt in the coming quarters will show whether higher input costs become a longer-term structural change or a temporary distortion as capacity is rebalanced toward AI-related chips.
