AI-driven memory crunch jolts India's smartphone market

TL;DR

Rising demand for AI data centers is increasing the cost of memory chips (RAM and storage), which are also essential for smartphones.
Manufacturers are prioritizing profitable AI chips, reducing capacity for consumer electronics and driving up their prices.
India, with a large segment of budget-conscious consumers, has seen a 10% year-over-year decline in smartphone shipments in Q2, the steepest June-quarter drop in six years.
The sub-₹15,000 segment in India experienced a 45% drop in shipments, heavily impacting Chinese brands concentrated in this market.
Consumers are expected to delay smartphone upgrades, extending replacement cycles, while premium brands are more insulated.
Some brands, like OnePlus, are shifting focus to profitable markets like India and withdrawing from Europe and North America.
The Indian smartphone market is moving from volume-led growth to value growth, with fewer phones sold but higher revenue per device.
Smartphone prices in India have increased by 4% to 68%, pushing consumers towards higher-priced devices, delayed upgrades, or the secondhand market.
Financing is becoming crucial for affordability, and brands are building inventory to mitigate future cost increases.
Memory shortages and elevated smartphone prices are predicted to persist until at least the end of 2027, with price increases moderating over time.

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