Budget-conscious phone buyers may be in for a struggle, and they have AI to thank for it. With memory costs continue to risethere may be 22% fewer phones under $400 in the market until the whole year and 2027, according to a new report on Tuesday from the technical research and advisory group Omdia.
While flagship phones like the iPhone 17 Pro Max and the Samsung Galaxy S26 Ultra, priced at over $1,000, continue to push the affordability envelope, buyers with tight budgets who aren’t willing to sacrifice great features are opting for cheaper phones. But if the makers of these devices under $400 are kicked out of the market, phone buyers with a small economic cushion can be very difficult.
Analyst Zaker Li said that for phones in that price range, the cost of manufacturing memory will almost double between the third quarter of 2025 and the first quarter of 2026. For phones over $400, memory costs have risen more than 100%, according to Omdia’s Quarterly Smartphone Technology Trends report.
Li said some companies are trying to offset rising memory costs by cutting costs on other components, such as screens, sensors and radio frequency modules, which are not readily available.
But Li said there isn’t much room to keep phones as cheap as there has been with rapidly rising memory costs.
As Chinese phone makers such as Oppo, Vivo, Honor, Xiaomi and Transsion are forced to raise phone prices, cost-conscious consumers will stop buying them, Li said. As demand continues to decline due to high prices, companies may stop producing low-end phones, Li predicts.
A sad analysis follows that’s what CNET mobile managing editor David Lumb learned at the Mobile World Congress in Barcelona in March: A quick build is coming out AI infrastructure it uses memory, with a lot of RAM needed to power AI systems. It is caused by a global RAM shortage that leads to higher phone prices, and the possibility that companies won’t make cheap phones, as it won’t be worth it.
“Some traders told us that they are thinking of leaving it [budget] half completely, because if you sell a phone for $150, and half the cost is memory, where are you going to make money? There’s no need to sell products, right?” Francisco Jeronimo, vice president of Worldwide Client Devices at IDC, told Lumb at MWC.
While AI requires a lot of RAM for its countless processes, phones use it to store and keep multiple apps open at the same time.
The idea of low budget phones
In the short term, Omdia says that the global phone market will decrease by 12% this year compared to 2025, due to the predicted decrease of 22% of the shipments of phones costing less than $400.
Long term, the prospects are bright. IDC’s Francisco Jeronimo told CNET in March that the RAM issue should be resolved in the fall of 2027 or early 2028. The construction of the AI infrastructure will slow down, and more RAM will be produced.
For now, consumers will stick with their current phones and avoid paying high upgrade prices, Forrester VP and principal analyst Dipanjan Chatterjee told Lumb. To combat that, companies will have to attract people to other non-phone products or add more features to phones to convince people to buy them.
For those willing to shell out more for a new device, Omdia says shipments of phones costing more than $400 will grow by 5.7% this year, which will match previous patterns: Even in times of economic depression, premium phones like the iPhone 17 Pro Max and the Galaxy S26 Ultra continue to sell, as their customers are more protected from financial shocks. Because of this RAM problem, phone makers are focusing more on high-end devices, and a large percentage of consumers don’t mind spending that much money, Omdia said. The percentage of memory-per-device costs also decreases significantly with higher-priced phones, said analyst Li.