Growing demand for AI memory chips is shaking up India's smartphone market. According to Counterpoint Research, smartphone shipments in India fell 10% year-over-year in the April-June quarter of 2026, the steepest June-quarter decline in six years. The culprit is soaring costs of RAM and storage components, increasingly diverted to AI data centers where manufacturers earn much higher margins.
Production shifts to high-bandwidth memory for AI
Companies like Samsung, SK Hynix, and Micron have repurposed production capacity toward high-bandwidth memory (HBM), far more profitable per wafer than the standard memory used in phones and laptops. This choice has reduced supply of traditional chips and driven up prices for consumer devices. Analysts had predicted this shift months ago, but it is now hitting price-sensitive markets like India with full force.
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Price-sensitive India hit hardest among major markets
With about 60% of its smartphone market concentrated in the sub-₹20,000 (under $210) segment, India has been hit harder than China, where shipments fell only 2% in the same quarter. The sub-₹15,000 segment saw a 45% year-over-year decline, Counterpoint said. Consumers are delaying upgrades, stretching replacement cycles to about four years from the previous 3.5.
OnePlus retreats from Europe and North America: a signal for the industry
Margin pressure is driving brands to rethink global strategies. OnePlus announced this week it will stop launching new products in Europe and North America while maintaining its India operations. Counterpoint data shows China accounted for 74% of OnePlus's global shipments in Q1 2026, up from 59% a year earlier, while India's share fell from 30% to 19%. This retreat signals a broader trend: budget-focused brands are abandoning less profitable markets.
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Financing and used market: survival strategies for Indian consumers
To cope with rising prices, consumers are increasingly turning to financing and the secondhand market. Kiranjeet Kaur, associate research director at IDC, noted that financing has become central to affordability. Smartphone prices in India have risen between 4% and 68% depending on the model, pushing many to delay upgrades or seek used devices. This shift is transforming the Indian market from volume-led growth to value growth, with fewer phones sold but at higher average prices.
High prices expected to persist until 2027
Kaur expects memory shortages and elevated smartphone prices to last at least until the end of 2027, though the pace of increases may moderate as consumers adjust. Meanwhile, the weakening rupee makes imports costlier, compounding the problem. Tarun Pathak, vice president at Counterpoint, noted that premium brands like Apple and Samsung are better insulated, but for Chinese mid-range and budget brands the challenge is severe. The industry is consolidating, and sub-brands must prove they can generate enough volumes to justify razor-thin margins.
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To see how AI is transforming other tech areas, check out the article on Google redesigning all 3,977 emoji in 3D with an AI tool. For more on the impact of AI demand on hardware components, read the Wikipedia entry on High Bandwidth Memory.
Source: https://techcrunch.com/2026/07/17/ai-driven-memory-crunch-jolts-indias-smartphone-market
