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A smartphone priced below $100 once represented the most accessible entry point to mobile internet, digital banking, messaging and online services. That price tier is now becoming far harder to sustain. Rising costs for memory chips, especially DRAM and NAND storage, are forcing handset makers to reconsider whether the lowest priced models can still generate an acceptable return. The pressure is visible across global markets, but it is especially apparent among Chinese brands that historically built large volumes through affordable devices.
The issue is rooted in the rapid expansion of AI data centres. These facilities require large quantities of advanced, higher value memory products, giving chip producers a strong reason to direct capacity toward servers rather than consumer electronics. That leaves smartphone suppliers competing for a tighter pool of conventional memory components. IDC expects global smartphone shipments to decline 16.7% in 2026 as the memory shortage raises production costs, while average selling prices are forecast to rise 27.6% to $581.
The effect is most severe at the bottom of the market because memory is no longer a modest line item in the cost of a basic phone. Omdia has said that higher DRAM and NAND prices are weighing most heavily on entry level demand, where manufacturers have less flexibility to absorb expenses. Counterpoint Research estimates that memory costs have grown to more than 40% and, in some cases, more than 50% of total component costs for lower priced smartphones. In the second quarter of 2026, the cost of materials for low end smartphones was 70% higher than a year earlier, according to Counterpoint.
The numbers help explain the sharp decline in the sub $100 category. About 173 million phones at that price point shipped worldwide in 2025. During the second quarter of 2026, shipments in the segment dropped almost 60% from a year earlier, according to IDC data. The change is not simply a matter of fewer promotions or a temporary product cycle. When a $100 phone must absorb a meaningful increase in memory cost, manufacturers have few options beyond cutting specifications, raising retail prices or withdrawing the model.
The contrast with premium handsets is becoming more pronounced. A consumer paying $1,000 or more for a flagship device may still notice higher prices, but the same component increase represents a smaller share of the final retail price. Premium vendors can also spread costs across more expensive cameras, processors, displays and service ecosystems. In the United States, Counterpoint said manufacturers had increased some direct retail prices by from $40 to $200 in 2026, while it projected a 13.5% year over year rise in North American average selling prices. The affordability effect, however, is far more acute when a similar increase is applied to a handset that previously sold for about $200.
Chinese manufacturers are adjusting their product plans accordingly. Xiaomi Corporation (HKEX: 1810) derived 27.7% of global shipments from sub $100 models in the first half of 2025. One year later, that portion had fallen to 11.2%, according to IDC figures. Its share of shipments below $200 also dropped from 60% to 52.5%. Counterpoint Research analyst Neil Shah estimates Xiaomi’s average selling price has risen about 30% since 2023 to $197, while OPPO’s has increased by a similar proportion to roughly $300.
Xiaomi’s recent launch of the Xiaomi 18 Fold provides a clear illustration of the new strategy. The foldable smartphone begins at about $1,640 (CNY 10,999). The device is aimed at buyers in the premium market, a sharp contrast with the inexpensive Redmi and other entry models that helped Xiaomi build scale. The company is not abandoning the mass market, but it is putting greater emphasis on devices with enough pricing room to manage rising component expenses.
That shift creates a more difficult choice for consumers and for brands. Buyers with tight budgets may face fewer new options, less memory capacity or longer replacement cycles. Manufacturers may gain better margins by selling more expensive models, but they could also lose volume in markets where affordability remains the main purchasing criterion. Even if memory supply improves, IDC’s Bryan Ma says that the likely result would be slower price increases rather than a return to previous levels. The low cost smartphone may remain available, but it is unlikely to look or cost the same as it did only a year ago.
