The Indian smartphone market is experiencing a serious downturn. In the second quarter of 2026, device shipments fell by 10% year-on-year, marking the worst performance for this period in six years. The cause is not merely seasonal fluctuations, but a structural crisis triggered by the artificial intelligence boom.
The key factor is a sharp increase in the price of memory chips. Leaders in the semiconductor industry, including Samsung, SK Hynix, and Micron, have redirected their production capacities towards manufacturing high-performance HBM memory, which is essential for data centers handling AI workloads. This has led to a shortage of components for consumer electronics and an explosive rise in prices. According to IDC estimates, the cost of memory chips has soared by nearly 300% over the year. In budget smartphone models, their share of the cost now exceeds 65%.
India has been hit harder than other major markets. For comparison, in China, shipments declined by only 2% over the same period. About 60% of the Indian market consists of devices costing less than 20,000 rupees (approximately $210). It is this segment, most sensitive to price, that has borne the brunt of the impact. Shipments of smartphones priced below 15,000 rupees ($150) collapsed by 45%. The combined share of Chinese brands, traditionally dominant in the budget segment, has fallen to its lowest level since 2020.
An exception against this backdrop is Samsung, the only major vendor to show growth in India — up 2% year-on-year. Apple's shipments fell by 3%, but this is not due to a drop in demand, but rather a shortage of iPhones themselves. Smartphone prices in the country have risen by 4–68% depending on the model. Consumers are starting to use older devices for longer: the average replacement cycle has increased from 3.5 to 4 years. Some buyers are moving to the secondary market.
Global Crisis and New Strategies
The problem is global in nature. Global smartphone shipments in the second quarter fell by 11%, to their lowest level since 2013. Xiaomi, Oppo, and vivo posted double-digit declines due to their focus on the budget segment, which suffered the most. Samsung, on the other hand, regained global leadership with a 24% share. Apple captured a fifth of the global market for the first time. According to a forecast by Counterpoint Research, the market will shrink by 14% by the end of 2026.
The crisis is already forcing companies to rethink their strategies. Chinese company OnePlus, a sub-brand of Oppo, has announced it will abandon new launches in Europe and North America. However, the firm will retain its business in India — its largest market outside of China. According to analysts' estimates, the memory shortage and high prices will persist at least until the end of 2027. The pressure is exacerbated by the weak Indian rupee, making component imports even more expensive.
Expert opinion: The smartphone market is entering a phase of structural restructuring. The AI boom is redistributing resources in the semiconductor industry, and the consumer sector finds itself in the position of a donor. In the next two years, we will see not just a rise in prices, but also a change in manufacturers' product lines — the focus will be on the premium segment, where margins allow for offsetting the increase in production costs. Budget devices, on the other hand, will shrink in assortment, which is particularly painful for developing markets like India.