Smartphone shoppers in India are feeling a strange kind of pain right now. Prices are climbing, and choices are shrinking; the reason has almost nothing to do with phones themselves.

It’s about memory chips. The same chips that power your phone’s storage and speed are now in high demand for something else entirely: AI data centers. 

RAM and storage chips go into two very different products. One is your phone, and the other is the massive computer systems that run AI.

Chipmakers like Samsung, SK Hynix, and Micron have started shifting their factories toward a special kind of memory called high-bandwidth memory. 

This type goes into AI accelerators. It’s also far more profitable per chip than the regular memory used in phones and laptops.

So these companies are making a business choice. They’re building more AI chips and fewer everyday ones. 

That leaves less memory for phone makers, and less supply means higher prices. 

India 

Smartphone shipments in India dropped 10% compared to last year during the April to June period. This marks the worst second-quarter decline in six years.

That’s according to Counterpoint Research, a firm that tracks the industry. Compare that to China, the world’s largest smartphone market. 

Shipments there fell just 2% over the same period. So why is India hurting so much more?

The answer comes down to price sensitivity. About 60% of India’s smartphone market sits below ₹20,000, or roughly $210. That’s the budget zone. 

And budget phones get hit hardest when component costs rise, according to Tarun Pathak, vice president of research at Counterpoint.

India isn’t just another market. It has over 1.4 billion people and more than 700 million smartphone users.

What happens there often predicts what’s coming for other price-sensitive countries, too. 

Phone Lifespan

Most people aren’t giving up on smartphones altogether. That’s not really an option anymore, but they are waiting longer before buying a new one.

Pathak says the average replacement cycle is stretching out. It used to sit around 3.5 years. Now it’s closer to four. 

That may not sound like much, but across hundreds of millions of users, it adds up fast. Premium brands are riding this out better than most. 

Apple and Samsung have more cushion because their buyers tend to care less about small price bumps. 

Financing options also help. When a phone costs more, spreading payments out makes it easier to swallow.

Samsung 

Samsung actually grew its shipments in India during the second quarter, up 2% from last year. It was the only major brand to post growth at all.

Apple didn’t fare as well, with shipments down 3%. But that drop wasn’t really about pricing. It came down to supply problems. 

Apple simply couldn’t deliver as many iPhones as buyers wanted. The real damage shows up further down the price ladder. 

Phones under ₹15,000, or about $150, saw shipments crash by 45% compared to last year. That’s a massive drop in a very short time.

Chinese smartphone brands lean heavily on this budget segment. So when it shrinks, they take the biggest hit. 

Their combined market share in India has now fallen to its lowest point in two years.

OnePlus 

OnePlus, a major Chinese brand, announced this week that it’s stepping back from launching new products in Europe and North America. It’s staying focused on India instead.

The numbers explain why. China now makes up 74% of OnePlus’s global smartphone shipments to retailers and distributors. That’s up sharply from 59% just a year earlier.

Meanwhile, India’s share of OnePlus sales dropped from 30% to 19%. Basically, OnePlus is retreating to the places where it can still turn a profit. 

Other budget brands may soon follow the same playbook as their margins keep shrinking.

Pathak explained that running multiple sub-brands only makes sense when each one sells enough to cover shared costs. Once margins get too thin, that math stops working. 

Consumers

Kiranjeet Kaur, an analyst at IDC, describes what’s happening in India as a move from volume growth to value growth. 

In plain terms, that means fewer phones are being sold, but each sale brings in more money.

Prices have jumped anywhere from 4% to 68%, depending on the specific model, according to Pathak. 

That’s a wide range, but it shows just how uneven the impact has been across different price tiers.

Shoppers are responding in a few different ways. Some are trading up to pricier phones since the gap between tiers has narrowed. 

Others are simply waiting longer to upgrade. And a growing number are turning to the secondhand phone market instead.

Financing has become essential for many buyers, Kaur said. Retailers are also stocking up on inventory ahead of India’s festive shopping season, hoping to lock in current prices before costs climb even higher.