The AI boom is making the cheapest smartphones disappear

AI data centers are hoovering up global memory‑chip supply, creating a shortage that has pushed smartphone prices higher and prompted makers to cut the cheapest models. Existing phone prices rose about 15% globally this year and new launches are roughly 25% pricier; regional increases reached about 21% in India, 19% in Asia‑Pacific and 18% in the Middle East and Africa (U.S. about 5%). Sub‑$100 shipments plunged roughly 60% year‑over‑year in Q2 2026 and the sub‑$150 segment is shrinking. Three suppliers - Samsung, SK Hynix and Micron - dominate memory production and redirected capacity to AI data centers in late 2025. Chinese brands, which supply about 60% of phones, have cut entry‑level projects and raised prices; for example, a Redmi 128GB model climbed about 36% in India.

The disappearance of very low‑cost phones threatens to widen the digital divide by putting internet access out of reach for the poorest. Entry‑level handsets can equal roughly 44% of monthly income for the bottom 20% globally and about 76% in parts of sub‑Saharan Africa, making replacements or upgrades unaffordable. Households may delay upgrades, share or borrow devices, stick with feature phones, or go offline when a device fails, undermining projections of hundreds of millions more people coming online by 2030. Analysts say the memory squeeze is unlikely to ease soon and manufacturers expect the market floor to shift upward, potentially leaving permanent gaps in affordability and connectivity.