AI data centers have absorbed the world's memory chip supply, pushing phone makers to drop their cheapest models; global handset prices are up roughly 15% this year.
Phone makers are not raising prices because they want to. They cannot get cheap memory. Only three companies make memory chips at scale — Samsung, SK Hynix and Micron — and together they hold over 90% of the market. In late 2025 all three shifted the vast majority of their output to AI data centers, leaving consumer electronics to queue.
How the cheap phone disappeared
When memory gets expensive, the thinnest-margin entry-level model is the first to go. Analysts at Counterpoint say Chinese manufacturers drastically cut their low-end projects this year and pivoted to pricier, more profitable devices.
Xiaomi raised a 128GB model in India from 12,500 rupees to 17,000 — a 36% jump. Oppo's sub-$100 shipments in Southeast Asia collapsed by 96%.
Who pays
The increases vary sharply by region: 21% in India, 19% across Asia-Pacific, 18% in the Middle East and Africa, but just 5% in the U.S. The poorest absorb the steepest rises.
For people who have not yet bought their first smartphone, the problem is not that it got dearer. It is that the category is gone. GSMA figures show an entry-level device costs the poorest fifth of the world 44% of monthly income — and 76% in sub-Saharan Africa.
What happens when people cannot afford one? They delay upgrading, borrow or share devices, stay on old feature phones, or drop offline entirely. AI is making services ever more dependent on the internet, while the door to it is getting more expensive.
Why it matters
The money poured into AI infrastructure has to come from somewhere, and one of the places it comes from is the memory inside an ordinary person's phone. When 'get the poor online' collides with 'feed the models,' the first one loses — not a price blip, but a redrawn digital divide.
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