The Indian smartphone market is experiencing its most severe downturn in six years. In the second quarter of 2026, device shipments fell by 10% year-on-year. This is the lowest figure for April-June since 2020 and a clear indicator of how the global artificial intelligence boom is distorting the consumer electronics market.
The root of the problem is the sharp increase in the cost of memory chips. Leading manufacturers, including Samsung, SK Hynix, and Micron, are actively reorienting their production capacities toward high-performance HBM memory, which is essential for data centers and AI workloads. As a result, production volumes of components for mobile devices are shrinking, and their prices are skyrocketing.
According to analysts, the cost of memory chips has risen by nearly 300% over the past year. In budget smartphones, the share of these components in the total cost has already exceeded 65%. This segment accounts for about 60% of the Indian market—devices priced under ₹20,000 (approximately $210). Here, the impact has been most severe.
Shipments of smartphones costing less than ₹15,000 (~$150) collapsed by 45%. The share of Chinese brands, which traditionally dominate this segment, fell to its lowest level since 2020. The only major vendor to show growth in India was Samsung—up 2% year-on-year. Apple's shipments declined by 3%, but the reason here is not demand, but a shortage of iPhones themselves due to logistical issues.
Smartphone prices in India have surged by 4–68% depending on the model. Consumers are forced to extend the lifespan of their old devices: the average replacement cycle has increased from 3.5 to 4 years. Some buyers are turning to the secondary market, putting additional pressure on sales of new devices.
Global context and forecasts
India is merely the most striking example of a broader trend. Global smartphone shipments in the second quarter fell by 11%, reaching their lowest level since 2013. Xiaomi, Oppo, and vivo, which focused on the budget segment, posted double-digit declines. Samsung, on the other hand, regained global leadership with a 24% share, while Apple captured 20% of the market for the first time. According to forecasts, the global market will shrink by 14% for the full year 2026.
Memory shortages and high prices are expected to persist at least until the end of 2027, according to experts. The situation is exacerbated by the weak Indian rupee: importing components becomes more expensive, and manufacturers pass the costs on to end consumers. The crisis is already forcing 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, retaining its business only in India—its largest market outside of China.
My analysis: The AI boom is creating a structural imbalance in the semiconductor industry that will only intensify in the coming years. For the smartphone market, this means not a temporary downturn, but a long-term shift in the pricing model. Manufacturers will either have to find alternative sources of memory or fully transition to a premium strategy, leaving the budget segment to fend for itself. India, as one of the most price-sensitive markets, will serve as a litmus test for this process.