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Iris Deng

As the memory chip shortage persists, budget smartphone makers are taking the hardest hit, with analysts warning that low-priced handsets have become “impossible to manufacture” profitably.
The cost of memory for handsets priced under US$100 is expected to surge 400 per cent in the third quarter of 2026, with the bill of materials for the most common configuration reaching US$70 from just US$14 in the same period last year, according to data from research firm Omdia.
Current memory prices have already exceeded the total bill of materials for this segment from a year ago, according to Jusy Hong, senior research manager at Omdia.
“Considering the memory price hike, it is impossible to manufacture smartphones below US$100 at the moment …[or] in the near future,” Hong said during a webinar on Friday.
Major smartphone vendors would try to abandon the money-losing segment despite strong consumer demand, pivoting to more value-added products in the mid-range categories, which in turn would drive up average retail prices, Hong added.
When memory prices stabilised in another year or two, small players in local markets were likely to revive the ultra-low-price segment, but for now “this market is simply disappearing”, Hong said.

The global smartphone industry is falling victim to unprecedented cost increases and supply shortages, as major memory chipmakers focus more on large-capacity storage products for AI projects and data centres. Supplies of conventional memory for consumer electronics have been squeezed as a result.
Global smartphone shipments declined 4 per cent year on year in the second quarter of 2026, with the full year volume expected to drop by 12 per cent, according to Omdia. Mid-to-low-end handsets priced under US$400 would face a steep yearly drop of 22 per cent.
Phone brands are passing the higher costs on to consumers, with the average price tag on a smartphone reaching US$577 in the first quarter, up 12 per cent from a year ago, Omdia data showed.
“Memory prices will continuously increase in the following quarters … the real impact will come in the second half,” Hong said.
Since late last year, Chinese brands have initiated several rounds of price hikes. Vivo, for instance, last month raised the price of the largest storage version of its iQOO 15 model to 6,999 yuan (US$1,033), a 1,500 yuan mark-up from when it was released in October.
Vivo and Oppo saw their second quarter global shipments decline 19.4 per cent and 17.5 per cent, respectively, while Xiaomi’s volume plunged 26.3 per cent, according to research firm IDC.
Smartphone brands were also racing to reduce their costs by downgrading displays and camera specifications, but as the bill of materials for other components was also on the rise, there was not much room for adjustment, according to Zaker Li, principal analyst at Omdia.
“It’s very hard for smartphone vendors to do some cost optimisations, so sometimes their only choice is to increase the retail price,” Li said during the Friday webinar.


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Major smartphone vendors will try to abandon the money-losing segment despite strong consumer demand, and pivot to more value-added products


Major smartphone vendors will try to abandon the money-losing segment despite strong consumer demand, and pivot to more value-added products.


Semiconductors

Xiaomi

Oppo

Vivo

Surging memory chip prices make profitable budget phones ‘impossible’, analysts say

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Major smartphone vendors will try to abandon the money-losing segment despite strong consumer demand, and pivot to more value-added products

Major smartphone vendors will try to abandon the money-losing segment despite strong consumer demand, and pivot to more value-added products