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

Key points

• India's smartphone shipments fell 10% in the April-to-June quarter of 2025, the steepest June-quarter drop in six years, according to Counterpoint Research.
• Phones priced below roughly $150 saw shipments collapse by 45% year-on-year in the same period.
• Memory chip makers Samsung, SK Hynix, and Micron have shifted factory capacity toward high-bandwidth memory chips used in 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.
• The memory shortage and elevated prices are expected to last until at least the end of 2027.

Here is a chain of events most phone buyers have not noticed yet. Companies racing to build artificial intelligence data centres need enormous quantities of specialised memory chips. The factories that make those chips are profitable enough that manufacturers have quietly shifted production away from the ordinary memory that goes into your phone. Less supply of ordinary memory means higher prices. Higher prices mean your next smartphone costs more, sometimes a lot more.

India is where that chain is snapping loudest.

The country is the world's second-largest smartphone market by shipments after China, and roughly 60% of its sales sit in the budget tier, meaning phones priced under about $210. That is exactly the segment where rising memory costs land hardest. Shipments fell 10% year-on-year in the April-to-June quarter of 2025. By comparison, China saw a 2% dip over the same period.

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

Not everyone is hurting equally. Samsung actually grew its India shipments by 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 sensitive to price increases, partly because easy financing makes expensive devices feel affordable month-to-month.

For budget buyers, the choices are grimmer. Analysts at Counterpoint Research expect consumers to stretch the time between upgrades 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 reshaping which brands bother showing up. Chinese smartphone maker OnePlus announced this week that 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.

When will phone prices come back down?

They probably will not, at least not soon. Analysts at IDC, a market research firm, expect the memory shortage and elevated prices to persist until at least the end of 2027. The pace of increases should slow as consumers adjust, but a return to 2023 price levels looks unlikely. India faces an extra problem: a weaker rupee makes imported components costlier still, and brands are passing that cost straight to shoppers.

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 round of price rises hits.

For anyone planning a phone upgrade this year, the practical takeaway is simple. If your current phone works, keeping it a little longer saves real money. If you do need a new one, budget for spending more than you did last time.