AI chip demand reduces availability of budget smartphones

The availability of smartphones priced under $100 is declining globally due to the surge in demand for artificial intelligence (AI) chips. This boom has caused a significant increase in memory costs, making budget-friendly devices less profitable for manufacturers.

According to IDC, while approximately 173 million smartphones under $100 were delivered last year, shipments in this category fell by nearly 60% in the second quarter of 2026 compared to the previous year. Chipmakers are prioritizing more profitable memory components intended for AI infrastructure, which reduces the supply available for low-end mobile devices. For phones costing under $200, memory now accounts for nearly 60% of the total component cost, according to Omdia.

Bryan Ma, vice president of device research at IDC, noted that low-end phones are becoming unprofitable to produce. In response, Chinese manufacturers are phasing out ultra-cheap models to focus on higher-margin segments. For example, Xiaomi saw its shipments of sub-$100 phones drop from 27.7% of its global deliveries in the first half of 2025 to just 11.2% a year later, with its average selling price rising to $197.