CNBC2 hours agoBusiness2 min read

Sub-$100 Smartphone Market Shrinks as Memory Costs Surge

Rising memory prices driven by AI infrastructure demand are forcing Chinese manufacturers to abandon low-end devices and shift toward premium segments.

Quick Look

Global shipments of sub-$100 smartphones have plummeted by nearly 60% as memory costs rise due to AI-driven demand.
Chinese manufacturers like Xiaomi and Oppo are shifting their product portfolios toward higher-end models to maintain profitability.

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Why It Matters

Memory chipmakers are prioritizing AI infrastructure, leading to supply shortages for consumer electronics. This has caused memory to represent 60% of the bill of materials for budget phones.

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The days of the sub-$100 smartphone may be numbered as memory costs soar, with China seeing one of the more dramatic shakeups in price points.

Some 173 million smartphones priced below $100 were shipped globally last year. In the second quarter of 2026, shipments in that segment fell almost 60% from a year earlier, IDC data showed. Sub-$100 devices accounted for 27.7% of global shipments for China's Xiaomi in the first half of 2025. A year later, that share had fallen to just 11.2%.

Blame, in part, artificial intelligence's voracious appetite for memory. Chipmakers have prioritized higher-value products used in AI infrastructure, squeezing supplies of those used in smartphones and pushing up costs.

Memory now accounts for almost 60% of the bill of materials for smartphones priced below $200, according to Omdia's Chow Sheng Win.

"Low-end phones are becoming uneconomic to manufacture," IDC Vice President of Client Device Research Bryan Ma said.

In a bid to lift margins, Chinese manufacturers are moving up-market. As cheaper models become uneconomic to produce, manufacturers are pruning them from their line-ups, pushing the overall market higher. Neil Shah at Counterpoint Research estimates Xiaomi's average selling price has risen about 30% since 2023 to $197, while Oppo's has climbed by a similar amount to $300.

Xiaomi's sub-$200 share of shipments fell from 60% to 52.5% over the same period, according to IDC data.

In mainland China, less than 20% of Xiaomi's volume is below $200, according to Chow.

That shift was on display this week when Xiaomi unveiled its higher-end 18 Fold, starting at 10,999 yuan ($1,640) and aimed squarely at the premium segment. Xiaomi didn't immediately respond to a request for comment outside normal business hours.

Chinese vendors are able to counter some of the pricing pressure, as they earn lucrative internet services and app revenues at home. Still, prices are unlikely to retreat anytime soon.

Shah says it is difficult to see prices returning to 2024 or early-2025 levels because memory manufacturers have little incentive to add capacity for the low end.

Even if the memory crunch eases, Ma said, "that just means that the price increases moderate," not reverse.

Open Questions

Will budget smartphone demand shift to secondary markets?
How will consumers react to the disappearance of sub-$100 devices?

Sub-$100 Smartphone Market Shrinks as Memory Costs Surge

Rising memory prices driven by AI infrastructure demand are forcing Chinese manufacturers to abandon low-end devices and shift toward premium segments.

Quick Look

Global shipments of sub-$100 smartphones have plummeted by nearly 60% as memory costs rise due to AI-driven demand.
Chinese manufacturers like Xiaomi and Oppo are shifting their product portfolios toward higher-end models to maintain profitability.