The AI chip shortage you never heard of is making your next phone more expensive

Key points

• India's smartphone shipments fell 10% year-on-year in the April-to-June quarter of 2025, the steepest June-quarter drop in six years, per Counterpoint Research.
• Phones priced below roughly $150 saw shipments collapse by 45% year-on-year in the same period.
• Samsung, SK Hynix and Micron have shifted factory capacity toward high-bandwidth memory for AI data centres, squeezing supply for consumer devices.
• Smartphone prices in India have risen between 4% and 68% depending on the model, analyst Tarun Pathak told TechCrunch.
• Memory shortages and elevated prices are expected to last until at least the end of 2027.

Here's a chain of events most phone buyers haven't noticed yet. Companies racing to build AI data centres need enormous quantities of specialised memory chips. The factories making those chips are profitable enough that manufacturers have quietly shifted production away from the ordinary memory that goes into your phone. Less supply means higher prices, and higher prices mean your next smartphone costs more, sometimes by a lot.

India is where that chain is snapping loudest.

Roughly 60% of India's smartphone sales sit in the budget tier, phones priced under about $210. That's exactly the segment where rising memory costs land hardest. Shipments fell 10% year-on-year in the April-to-June quarter of 2025. China saw only a 2% dip over the same period.

The pain concentrates at the cheapest end. Sub-$150 phones saw shipments drop 45% in a single year. Chinese brands, which dominate that space, watched their combined market share fall to its lowest second-quarter level since 2020.

Not everyone is hurting equally. Samsung grew its India shipments 2% in the quarter. Apple slipped 3%, though that largely reflected supply constraints rather than weak demand. Buyers of higher-end phones have proved less price-sensitive, partly because financing makes expensive devices feel affordable month to month.

For budget buyers, the choices are grimmer. Counterpoint Research expects consumers to stretch replacement cycles to around four years, up from about 3.5 years previously. Some are turning to the secondhand market; others are simply waiting.

The squeeze is also reshaping which brands bother showing up. OnePlus announced this week it would stop launching new products in Europe and North America, retreating to markets where its economics still work. India currently accounts for 19% of its shipments, down from 30% a year ago. AI2Day has been tracking India's AI economy closely: our 13 July 2026 story on Anthropic's rupee pricing for Claude found India is already Claude's second-biggest market worldwide, which makes the slowdown in consumer hardware spending here worth watching.

When will phone prices come back down?

Probably not soon. IDC, a market-research firm, expects the shortage and elevated prices to persist well past 2026, with analysts pointing to late 2027 as the earliest realistic turning point. Price-increase rates should slow as consumers adjust, but a return to 2023 levels looks unlikely. India faces a compounding problem: a weaker rupee makes imported components costlier, and brands are passing that cost straight to shoppers, a dynamic IDC associate research director Kiranjeet Kaur described to TechCrunch as "a double whammy."

Financing deals are becoming central to how people afford phones at all. Retailers are also stocking up ahead of India's festive-season sales to lock in component costs before another price round hits.

The spec that matters most here isn't screen resolution or camera megapixels. It's the memory allocation your phone needs to function, because that's the number driving prices up, and the number chip makers won't be optimising for consumer devices again until AI data-centre demand plateaus.