Affordable smartphones could become significantly more expensive by 2027 as artificial intelligence continues driving demand for memory chips.
A new industry report suggests AI data centers are consuming an increasing share of global memory production. Consequently, smartphone manufacturers may struggle to secure enough components for budget devices.
If current trends continue, companies may increase prices, reduce hardware specifications, or discontinue some entry-level smartphones.
AI Demand Is Increasing Pressure on Memory Supply
Industry estimates indicate AI computing hardware already consumes more than half of the world’s available DRAM wafer capacity.
Moreover, that share could exceed 60% next year.
As AI infrastructure expands, smartphone makers must compete for a shrinking supply of mobile memory. Therefore, manufacturers could face higher production costs across the industry.
Budget Smartphones Could Face the Biggest Impact
According to the report, smartphones priced below 1,500 yuan, or roughly $220, may become increasingly difficult to find in 2027.
Memory and storage components could account for up to 60% of the manufacturing cost of some affordable smartphones.
As a result, manufacturers may struggle to cover the remaining expenses, including processors, displays, cameras, batteries, assembly, and distribution.
To protect profitability, companies could respond in several ways.
They may:
- Increase smartphone prices.
- Reduce RAM capacity.
- Lower storage options.
- Remove selected features.
- Discontinue less profitable entry-level models.
Budget smartphones remain especially vulnerable because manufacturers already earn relatively small profits from these devices.
DRAM Prices Continue Rising
The report states that DRAM prices have increased by as much as 700% since 2022.
Major memory manufacturers have increasingly shifted production toward high-margin memory used in AI servers.
Samsung, SK hynix, and Micron together control more than 90% of the global DRAM market by revenue.
As these companies prioritize AI infrastructure, less production capacity remains available for traditional smartphone and computer memory.
Older memory technologies are also experiencing supply pressure.
Production of mature standards such as DDR4 continues to decline, although many affordable smartphones still rely on these components.
The report also notes that prices for even older DDR2 memory have increased because of tightening supply.
Global Smartphone Shipments Could Decline
The memory shortage is also affecting the broader smartphone industry.
Industry forecasts suggest global smartphone shipments could decline by 12.9% in 2026, reaching approximately 1.12 billion units.
If that happens, annual shipments would fall to their lowest level in more than a decade.
Meanwhile, the average smartphone selling price could increase by 14% to a record $523.
Manufacturers appear to be focusing more on premium devices because they generate higher profit margins than entry-level models.
Market growth is expected to remain modest in 2027 before improving in 2028.
At the same time, personal computer shipments could also decline as memory shortages increase production costs.
Chinese Memory Suppliers May Provide Limited Support
Chinese memory manufacturers, including CXMT and YMTC, could help increase supply for domestic smartphone brands such as Huawei, Xiaomi, and Oppo.
However, geopolitical restrictions continue limiting access for many companies outside China.
Reports suggest Apple has sought approval from the United States government to purchase memory from CXMT to reduce supply risks.
Industry analyst Ming-Chi Kuo believes using Chinese suppliers would mainly improve Apple’s memory supply rather than significantly reduce costs.
He also estimates that 15% to 20% of memory capacity currently allocated to consumer electronics in 2026 could shift toward AI data centers during 2027.
Consequently, manufacturers are placing greater importance on securing stable component supplies instead of negotiating lower prices.
Higher Prices Could Become the New Reality
The shortage is unlikely to end quickly because expanding semiconductor production requires new factories, advanced equipment, and lengthy qualification processes.
Lenovo has warned that elevated DRAM and NAND prices may represent a “new normal” rather than a temporary market trend.
The company also believes prices are unlikely to return to the unusually low levels recorded during early 2025.
Unless global memory production expands faster than AI demand, affordable smartphones may continue becoming more expensive.
At the same time, manufacturers could introduce devices with fewer features to control costs.
As the AI industry grows rapidly, consumers may find that smartphones once priced around $200 gradually move into higher price categories, while truly budget-friendly options become increasingly difficult to find.
