The world\u2019s cheapest smartphones are disappearing because AI infrastructure is absorbing the components.<\/p>\n
Prices of existing smartphone models have risen by about 15% globally this year<\/a>, while newly launched models are roughly 25% more expensive than last year. A global memory chip shortage, driven by demand from AI data centers, is pushing up the cost of making smartphones.<\/p>\n Chinese smartphone makers \u2014 which have championed affordable, feature-rich devices and account for approximately 60% of all smartphones shipped globally<\/a> \u2014 have \u201cdrastically reduced\u201d their entry-level projects this year as memory-chip costs have risen, Ivan Lam, senior analyst at research firm Counterpoint, told Rest of World. They are instead prioritizing more profitable premium devices.<\/p>\n The smartphone price increases vary sharply by region: They have risen by 21% in India, 19% across Asia-Pacific, and 18% in the Middle East and Africa. In the U.S., they have gone up by just 5%.<\/p>\n The shift could affect more than consumers looking for cheaper phones. For people who have yet to buy their first smartphone, higher prices could make it harder to get online at all \u2014 potentially widening the digital divide. The consequences will also reach the U.S. as more essential services move online and the global supply chain for smartphones becomes more expensive.<\/p>\n GSMA, the global mobile industry association, had earlier said nearly 800 million more people will use mobile internet by 2030. But it is concerned that rising smartphone costs would affect this projection and widen the gap of digital inequality, Claire Sibthorpe, head of digital inclusion at the group\u2019s nonprofit foundation, told Rest of World.<\/p>\n \u201cWe live in an increasingly digital world, and the proliferation of technologies such as AI is creating greater digital divides and inequities,\u201d Sibthorpe said. \u201cStakeholders are increasingly using AI to provide access to important services, but people won\u2019t be able to benefit without access to an internet-enabled phone and the internet.\u201d\u00a0<\/p>\n Smartphones under $150<\/p>\n In 2025, more than one in four<\/a> smartphones shipped globally cost less than $150<\/a>. That market is now shrinking.<\/p>\n Chinese phonemakers including Xiaomii<\/a>Xiaomi<\/a>Xiaomi is a Chinese consumer electronics company that leads the country in smartphone manufacturing and sales.READ MORE<\/a>, Oppo, Vivo, and Huaweii<\/a>Huawei<\/a>Huawei is a Chinese technology company focused on mobile phones and telecommunications, and is seen as a poster child for China\u2019s global tech ambitions.READ MORE<\/a> have built their businesses around offering affordable phones with increasingly sophisticated features. But the economics of that strategy are changing.<\/p>\n What used to be below $150 may become below $250, or even $300.\u201dIvan Lam, senior analyst, Counterpoint<\/p>\n Chinese companies \u201cwould rather reduce investment in products below $150 or $200 and put more resources into higher-margin phones, branding, user experience, and AI,\u201d said Lam.<\/p>\n In India, Xiaomi raised the price<\/a> of a 128GB Redmi 15C from 12,499 rupees ($140) at launch last December to 16,999 rupees ($190) in June, a 36% increase. In Southeast Asia,\u00a0Oppo\u2019s sub-$100 phone shipments plunged 96%, and Vivo moved its main entry-level model above $100 in most markets, according to research firm Omdia<\/a>. In Africa, where 81% of smartphones shipped last year cost less than $200, shipments of sub-$100 phones fell 34% year over year in the second quarter of 2026.<\/p>\n \u201cWhat used to be below $150 may become below $250, or even $300,\u201d Lam said, adding that he does not expect costs to return to their pre-2025 levels.<\/p>\n Pivoting to AI data centers<\/p>\n The memory-chip shortage is unlikely to ease soon, Ramon Llamas, research director in mobile devices at market research and advisory firm IDC, told Rest of World.<\/p>\n \u201cThere are three primary manufacturers of memory, and in late 2025, all of them pivoted the vast majority of their supply towards AI centers instead of consumer electronics,\u201d Llamas said. \u201cThat left many companies scrambling for inventory. \u2026 Scarcity of memory has driven up prices for memory, and those price increases have been passed on to the consumer.\u201d<\/p>\n Samsung Electronics, SK Hynix, and Micron Technology make up more than<\/a> 90% of the global memory chip market. These companies have entered several partnerships<\/a> with U.S. AI giants in recent years.<\/p>\n S&P Global has estimated that the capital expenditure of U.S. hyperscalers \u2014 Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX \u2014 will exceed $1.3 trillion in 2027<\/a>, up from a projected $870 billion in 2026 and $470 billion in 2025.<\/p>\n Shipments of sub-$100 smartphones are already falling sharply. The 173 million sub-$100 smartphones shipped globally last year are disappearing, with shipments<\/a> falling almost 60% year over year in the second quarter of 2026, according to IDC.<\/p>\n Barrier to entry<\/p>\n For the world\u2019s poorest consumers, the problem is not simply that smartphones are getting more expensive. It\u2019s that the cheapest phones are disappearing.<\/p>\n