Global AI Boom Could Kill Off Budget Smartphones Next Year

Affordable smartphones could become significantly more expensive or disappear from parts of the market in 2027 as AI data centers consume a growing share of global memory production.

Industry estimates cited by MyDrivers suggest AI computing hardware already uses more than half of available DRAM wafer capacity. That share could exceed 60% next year, leaving phone manufacturers competing for a shrinking supply of mobile memory and forcing them to raise prices or reduce specifications.

Budget Phones Under Threat

The report predicts that smartphones priced below 1,500 yuan, or approximately $220, could become difficult to find in 2027.

Memory and storage components could reportedly account for as much as 60% of the manufacturing cost of some affordable phones. That would leave manufacturers with little room to cover processors, displays, cameras, batteries, assembly and distribution while still generating a profit.

Phone makers could respond by raising prices, reducing RAM and storage capacities, removing features or discontinuing their least profitable models. Entry-level devices would face the greatest pressure because their already thin margins provide little protection against rising component costs.

DRAM Prices Surge

DRAM prices have reportedly risen by as much as 700% since 2022 as manufacturers direct more production toward higher-margin memory for AI servers.

Samsung, SK hynix and Micron collectively control more than 90% of the global DRAM market by revenue. Their increasing focus on AI infrastructure, particularly high-bandwidth memory, has reduced the capacity available for conventional mobile and computer memory.

Older memory standards are also being affected. Production of mature products such as DDR4 is shrinking, even though many affordable devices still depend on these components. MyDrivers reports that the imbalance has become severe enough to increase prices for much older DDR2 memory as well.

Smartphone Shipments Falling

The memory crisis is already reshaping the wider smartphone market.

IDC expects global smartphone shipments to fall 12.9% in 2026 to approximately 1.12 billion units, their lowest level in more than a decade. The research firm also expects the average smartphone selling price to rise 14% to a record $523 as manufacturers move away from less profitable entry-level devices.

IDC forecasts only modest smartphone market growth of around 1.9% in 2027, followed by a stronger recovery in 2028. PC shipments are also expected to decline sharply as the same memory shortage increases hardware costs.

Chinese Suppliers Offer Limited Relief

Chinese memory manufacturers CXMT and YMTC could provide some additional supply, particularly for domestic brands including Huawei, Xiaomi and Oppo.

However, geopolitical restrictions make it considerably harder for companies outside China to rely on these suppliers. Apple has reportedly sought approval from the US government to purchase memory from CXMT as it attempts to reduce its exposure to the worsening shortage.

Analyst Ming-Chi Kuo said using Chinese suppliers would primarily help Apple secure enough memory rather than obtain substantially lower prices. He estimates that 15% to 20% of memory capacity allocated to consumer electronics in 2026 could move to data centers during 2027, further widening the supply gap.

Manufacturers are therefore prioritizing supply security over price negotiations. Even access to additional Chinese production may reduce the risk of shortages without reversing the broader increase in memory costs.

Prices May Stay High

The shortage is unlikely to be resolved quickly because increasing semiconductor production requires new factories, equipment and lengthy qualification processes.

Lenovo has warned that elevated DRAM and NAND prices may represent a “new normal” rather than a temporary market cycle. The company does not expect prices to return to the unusually low levels recorded in early 2025, even as additional capacity begins arriving later in the decade.

Unless supply expands faster than demand from AI infrastructure, budget smartphones could either become substantially more expensive or offer fewer features. For consumers, the result may be a market where devices once sold for around $200 move into higher price categories while genuinely low-cost options become increasingly rare.