The ongoing memory crisis is pushing up the entry-level price of smartphones. Omdia predicts that smartphone manufacturers will significantly cut their budget device offerings.
Anyone looking for a new smartphone without wanting to spend too much money seems to be facing a difficult search. Omdia predicts that budget devices (under 400 euros) are gradually becoming an exception. The supply of smartphones within the lower price brackets is at risk of shrinking by 22 percent.
The explanation is not hard to find. Since the end of last year, the prices of RAM and NAND memory have been rising almost incessantly, and improvement does not seem to be on the horizon just yet. AI companies are buying up memory en masse, and it is primarily the electronics market feeling the consequences. Just as in the laptop market, this is causing smartphone prices to rise significantly.
Higher costs, smaller margins
This particularly affects the lower price segments, Omdia notes, because memory accounts for a much higher share of the production cost there. For devices under four hundred euros, memory accounts for nearly 60 percent of the total production costs. This makes it almost impossible for manufacturers to achieve desired margins on these devices, making it less interesting to produce them in large quantities.
For more expensive devices (800 euros or more), the impact of memory prices is currently more limited, although memory costs are also rising significantly in the premium segment. Memory now accounts for 26 percent of the total production cost, whereas it was only eleven percent in the third quarter of 2025.
Market shrinking
Manufacturers can save on the display, camera, and processor to compensate for memory costs. Nevertheless, Omdia primarily predicts a shift toward the mid-range and premium segments in the smartphone offering. Either more expensive devices will be produced, or devices that previously belonged in the budget segment will move up a price bracket.
Whether consumers are waiting for that is another matter. Manufacturers achieve their volumes precisely with cheaper devices, especially in markets such as Asia, Africa, and Latin America. It therefore promises to be a difficult year for the smartphone market. IDC already predicted a contraction of 12.9 percent in global sales at the beginning of this year. Omdia also sees that consumers are continuing to use their devices longer to postpone the purchase of a new one, or are turning their attention to the second-hand market.
The situation in the memory market does not seem likely to change anytime soon. Memory producers such as Samsung, SK Hynix, and Micron are currently the big winners. Manufacturers and, above all, consumers pay the price at the end of the chain.