Sub-Rs 20,000 smartphone market may be heading to a ‘collapse’ and reason is the ‘most-loved and hated’ technology right now (Representative image)
The decline in the sub-$200 smartphone segment reflects a broader structural shift in the market rather than a single factor. Globally, the refurbished smartphone market is expected to grow 14% YoY in 2026, while in India, we expect it to grow 16% YoY. Brands with greater exposure to the mass-market sub-INR 20,000 segment are likely to face the most pressure, as they have less room to absorb higher costs without raising prices or compromising specifications.
Rising memory and chipset costs are putting pressure on the phones that operate on the smallest margins. At the same time, the AI data-centre boom is increasing demand for the same memory components used in smartphones. For buyers, especially in price-sensitive markets such as India, the result could be simple: pay more for a new phone, accept lower specifications or look at the refurbished market. Rising memory, chipset and other component costs are putting greater pressure on entry-level smartphones, where margins are already thin and consumers are highly price sensitive. The AI data-centre boom is adding to this pressure, particularly through strong demand for DRAM and NAND, tightening memory supply and pushing memory prices up nearly fourfold, with prices expected to approach 5x soon. This is translating into higher smartphone prices or lower memory configurations, particularly in budget devices. At the same time, premiumization and longer replacement cycles are reducing demand for low-cost smartphones, as consumers either trade up, hold on to existing devices for longer or delay purchases. This could make smartphone adoption more challenging for first-time buyers in developing markets, while creating opportunities for refurbished and pre-owned devices that offer better specifications at lower prices. However, financing, promotions, trade-ins and older-generation models can help cushion the affordability impact.
How is the AI boom affecting sub-Rs 20,000 phones
Singh said brands with greater exposure to the sub-Rs 20,000 segment are likely to face the most pressure if the cost of RAM, storage and processors continues to rise.
That stronger demand is tightening memory supply and has pushed memory prices up nearly fourfold, with prices expected to approach five times their earlier levels, according to Singh. “The AI data-centre boom is adding to this pressure, particularly through strong demand for DRAM and NAND, tightening memory supply and pushing memory prices up nearly fourfold, with prices expected to approach 5x soon,” Singh said. This is where the AI data-centre boom enters the picture. AI servers require large amounts of memory and storage, increasing demand for components such as DRAM and NAND. For smartphone makers, higher memory costs can eventually show up in the products consumers buy. A budget phone could become more expensive while offering similar specifications, or a phone at the same price could come with a lower memory configuration.
Why are budget phones facing a bigger squeeze
“Rising memory, chipset and other component costs are putting greater pressure on entry-level smartphones, where margins are already thin and consumers are highly price sensitive,” Singh said. They can raise the price. They can offer less memory or storage. Or they can absorb some of the additional cost themselves. None of those options is particularly attractive in a segment where buyers are highly price sensitive.