India's smartphone market is experiencing a severe downturn: shipments in the second quarter of 2026 fell by 10% year-on-year. This is the worst result for the April-June period in six years. The main blow hit the budget segment, which accounts for about 60% of the country's market.
The key reason is a sharp rise in memory chip prices, driven by the global artificial intelligence boom. Semiconductor industry giants such as Samsung, SK Hynix, and Micron have redirected their production capacities to manufacturing HBM (High Bandwidth Memory) for data centers. This has led to a shortage and price increases for consumer electronics components. According to IDC, memory chip prices have surged nearly 300% over the year, and in budget smartphones, their share of the cost has exceeded 65%.
India hit harder than China
The Indian market suffered significantly more than China's, where shipments fell by only 2% over the same period. The situation is particularly dramatic in the segment of devices under ₹15,000 (~$150), where shipments collapsed by 45%. The combined share of Chinese brands dropped to its lowest since 2020. The only major manufacturer to show growth in India was Samsung (+2% year-on-year). Apple's shipments, on the other hand, fell by 3%, but this is not due to declining demand but rather a shortage of iPhones themselves.
Smartphone prices in the country have risen by 4-68% depending on the model. As a result, the average device replacement cycle has stretched from 3.5 to 4 years, and some consumers are switching to the secondary market.
Global crisis and its consequences
The problem is systemic: global smartphone shipments in the second quarter fell by 11%, reaching a low not seen since 2013. Xiaomi, Oppo, and vivo posted double-digit declines due to their focus on budget models. Samsung, in contrast, regained global leadership with a 24% share, while Apple captured 20% of the global market for the first time. According to Counterpoint's forecast, the market will shrink by 14% by the end of 2026.
IDC analysts warn that the memory shortage and high prices will persist at least until the end of 2027. The pressure is compounded by the weak Indian rupee, making component imports even more expensive. Manufacturers are forced to pass costs on to consumers.
The crisis is already prompting companies to rethink their strategies. For example, OnePlus (a subsidiary brand of Oppo) has announced it will halt new launches in Europe and North America while maintaining its business in India—its largest market outside China.
My analysis: This crisis vividly demonstrates how the AI race is reshaping the entire electronics supply chain. Memory manufacturers are reaping superprofits from server chips, but at the expense of the consumer sector. India, with its high price sensitivity, has found itself at the epicenter of the storm. In the short term, we will see further market consolidation and the exit of weak players, especially from the budget segment.