That $100 phone you were going to grab for your kid’s first device, or hand down to grandma, could become a dream in a while. AI’s hunger for memory chips just made the entire budget phone category borderline impossible to build.
So how bad are we actually talking?
According to research firm Omdia, memory costs for phones priced under $100 are set to surge 400% in the third quarter of 2026. If that happens, the bill of materials for the most common configuration will jump from just $14 a year ago to roughly $70 (via South China Morning Post).
Omdia’s senior research manager, Jusy Hong, didn’t sugarcoat it. Current memory prices have already blown past what the entire bill of materials for budget smartphones (around $100) looked like a year ago.
Her verdict, delivered during a Friday webinar: “it is impossible to manufacture smartphones below US$100 at the moment… [or] in the near future.” Based on the prediction, vendors are expected to abandon the segment entirely.
Instead, they could chase pricier mid-range devices, even with real consumer demand still sitting unmet.
Why is this happening now, and who’s getting hit hardest?
You should blame AI directly. Memory chipmakers have redirected manufacturing toward high-capacity infrastructure feeding AI servers and data centers, which, in turn, is starving supply for the cheaper chips budget phones or the entire consumer electronics industry depends on.
Average smartphone prices hit $577 in Q1 2026, a 12% increase year-over-year. This has, in turn, set off a market slowdown, with Q2 global shipments dropping by 4%. The firm Omdia projects a 12% full-year decline in overall smartphone shipments, with budget devices taking the hardest hit as models priced under $400 face a severe 22% contraction.
Vivo already hiked its iQOO 15’s top storage config by 1,500 yuan, while Oppo and Xiaomi all posted double-digit shipment declines last quarter, per IDC. Omdia’s Zaker Li says brands are stripping displays and camera specs to offset costs. But even so, rising prices elsewhere leave little room to maneuver, forcing retail hikes instead.
Hong expects the ultra-cheap segment to eventually return once memory prices settle, but that might not happen for a year or so.