Rising DRAM prices have upended the economics of budget smartphones, squeezing profit margins and forcing manufacturers to either raise prices or downgrade components. According to market analyst Omdia, memory costs now consume nearly 60 percent of the bill of materials for phones priced under $400, making it commercially unsustainable to produce them at the low prices consumers expect. This trend is already reshaping the global smartphone market, with shipments of sub-$400 devices forecast to drop 22 percent year-on-year in 2026.

What You Need to Know

The surge in memory prices, driven partly by demand for AI chips, is hitting budget smartphones hardest because memory accounts for a large share of their total cost. Manufacturers are resorting to cheaper displays, fewer cameras and older processors to keep prices low. Consumers may need to spend more for the same feature set or consider buying refurbished devices. The average smartphone lifespan is already 4.2 years and is expected to stretch to 4.7 years by 2030.

The Cost Squeeze on Entry-Level Phones

Omdia estimates that during the first quarter of 2026, memory costs made up almost 60 percent of the total bill of materials for smartphones under $400. With DRAM prices expected to rise another 50 percent or more in 2026, according to market watcher TrendForce, budget device makers have little room to absorb the increase. Entry-level phones already operate on such thin margins that even small component price hikes can wipe out profitability. For manufacturers, the only options are to raise retail prices, cut production or sacrifice features elsewhere.

Manufacturer Trade-Offs and Downgrades

To offset rising memory costs, smartphone makers are making difficult compromises. This is leading to devices that offer less than buyers might expect at a given price point. Common trade-offs include:

  • Display downgrades: China-based manufacturers are reverting from LTPO to LTPS panels in some models, saving $3 to $5 per device while sacrificing refresh rate and power efficiency.
  • Fewer cameras and smaller sensors: Vendors are reducing camera counts and using smaller image sensors to trim costs.
  • Older system-on-chip (SoC) components: Shifting to previous-generation SoCs can cut processor costs by 30 to 40 percent.

These adjustments mean that a phone costing $400 in 2026 may offer the same performance as a $300 phone from previous years, effectively lowering the value proposition for cost-conscious consumers.

Why This Matters

The erosion of the budget smartphone segment has real-world consequences for millions of users. With low-end phones becoming less available or more expensive, many consumers will be forced to delay upgrades, pay more for mid-range devices or turn to the second-hand market. Omdia forecasts the global smartphone market will decline 12 percent overall in 2026, but the above-$400 segment is expected to grow 5.7 percent as manufacturers shift production priority toward higher-margin models. For consumers, this means the era of $200 phones with decent specifications may be coming to an end. The second-hand market is already expanding, with a 12 percent increase in trade expected this year as buyers seek premium devices at lower prices. Memory manufacturers such as Samsung, meanwhile, are benefiting from the AI-driven demand for DRAM, while end users bear the cost.