TL;DR
Memory makers redirected wafers from phones to AI chips. LPDDR prices surged 250%. India’s sub-$100 phone market collapsed 59%.
In 1985, the best computer a reasonably affluent American could buy was the IBM PC AT, which cost $19,400 in today’s money. Today, a Tecno Spark Go costs $30 in a Nairobi market stall and runs a processor billions of times faster. No other good in history has experienced a cost decline on that scale.
That era is now ending. The International Data Corporation predicts worldwide smartphone shipments will fall 13% in 2026, the largest single-year decline ever. In Africa and the Middle East, the drop exceeds 20%.
The crash is concentrated at the cheapest end of the market. IDC calls it “a structural reset of the entire market.” A huge share of the world’s population is getting priced out of smartphone ownership.
The reason is memory. Smartphones, like all computers, use DRAM. The global supply of DRAM is remarkably inelastic because memory is extraordinarily difficult and expensive to produce.
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For decades, most DRAM went to smartphones and laptops. In the last three years, AI emerged as an enormous and hugely profitable consumer of memory. The result is a massive reallocation of DRAM production away from consumer electronics and toward AI data centres.
Three companies, Samsung, SK Hynix, and Micron, produce more than 90% of the world’s DRAM. Building a single state-of-the-art memory fabrication facility costs $15 to $20 billion. It takes years of producing defective chips before yields become competitive.
These memory makers learned a brutal lesson from decades of boom-and-bust cycles: always leave demand unmet. Intel, Texas Instruments, IBM, Germany’s Qimonda, and Japan’s Elpida all exited or collapsed. The survivors’ strategy is capital discipline above all else.
AI changed the calculus. Training and running AI models requires high-bandwidth memory, or HBM, which stacks multiple DRAM dies vertically and connects them with thousands of tiny channels. A single gigabyte of HBM consumes more than three times the wafer capacity of a gigabyte of standard DRAM.
In 2023, HBM accounted for 2% of memory makers’ wafers. By end of 2026, it is expected to reach 20%. HBM margins run at 70% or higher. Commodity DRAM margins sit between 20% and 30%.
The memory makers did not expand total production to meet HBM demand. They reallocated existing capacity. Every wafer pushed into HBM removes capacity from the memory that goes into phones and laptops. By end of 2025, SK Hynix was directing 30% of its wafers to HBM.
Micron went further. In December 2025, it discontinued its consumer-oriented Crucial brand entirely. It ceased all consumer shipments and redirected everything to AI and enterprise. One of three global DRAM producers simply left the consumer market.
The result: between Q1 2025 and Q1 2026, LPDDR4 prices increased 250%. LPDDR5 prices rose 220%. DDR5 prices in Germany surged 414%. Memory’s share of the bill of materials on a budget Android phone went from around 15% to as much as 50%.
For budget smartphone makers like Transsion, Oppo, Vivo, and Lava, the model is broken. These companies bought last-generation components on the spot market and assembled phones at extremely thin margins. Transsion shipped 105 million phones in 2024 and held 48% of the African smartphone market.
But the sub-$100 smartphone is becoming, as one analyst put it, “permanently uneconomical.” Phones that sold for $50 now sell for $120 or more. Transsion’s net profit fell 54% in 2025. It cut its shipment target by 40%.
Oppo slashed shipments by more than 20%. Vivo cut by nearly 15%. Xiaomi’s annual shipments fell 19% year on year in Q1 2026.
In India, the sub-$100 smartphone market collapsed 59% year on year in Q1 2026. In Africa, where 81% of smartphone shipments were in the sub-$200 category in 2025, many consumers will simply be priced out of phone ownership entirely. The technology that connected hundreds of millions of the world’s poorest people to the internet is becoming unaffordable.
The memory makers have never been more profitable. In 2025, they earned a collective $70 billion in profit. In 2026, they are expected to earn more than double that. Samsung’s workers nearly went on strike this month over how those profits should be shared.
The crisis is not staying in the poor world. Samsung’s consumer division could not secure a long-term LPDDR agreement with Samsung’s own memory division. The Galaxy S26 shipped with less memory than expected at higher prices. Samsung executives warned the company would record its first-ever annual net loss on smartphones.
Dell hiked laptop prices 15% to 20% in December 2025. Apple, which traditionally negotiated multi-year memory agreements to smooth costs, saw its latest contract expire in January 2026. The memory makers refused anything longer than quarterly pricing.
In February, Apple agreed to pay Samsung a 100% premium on the LPDDR5X memory for the iPhone. Over the course of 2025, the 12GB chips powering the iPhone 17 Pro increased in price by 230%. Apple has delayed the iPhone 18 standard model to spring 2027 and pushed back the new Mac Studio from summer to autumn.
The outlook is worsening. Nvidia’s Vera Rubin platform, launching in late 2026, will pair Rubin GPUs with Vera CPUs that are enormously hungry for LPDDR. By 2027, Vera Rubin is projected to consume more LPDDR than Apple and Samsung’s consumer divisions combined.
JPMorgan projects memory could account for 45% of the iPhone’s component cost by 2027, up from roughly 10% today. Apple will face a choice: cut into its margins or dramatically increase prices. Neither option is attractive for a company that sells 230 million phones a year.
The only near-term supply relief is coming from China. ChangXin Memory Technologies already commands more than 30% of China’s LPDDR market and its DRAM has been spotted inside Corsair’s retail DDR5 kits. But even CXMT is planning to convert about 20% of its capacity to HBM, because the margins are irresistible.
Hyperscalers are willing to outbid budget phone manufacturers for access to DRAM. Microsoft and Google executives reportedly spent the end of 2025 “practically taking up permanent residence in Korea” lobbying Samsung and SK Hynix for allocation. More than 30% of hyperscaler capital expenditure now goes to DRAM alone.
South Korea’s deputy prime minister said this week that “the benefits of AI must also go to the public.” The memory crisis is the starkest illustration of why that statement matters. The wealth created by AI is accruing to three memory makers and the hyperscalers they supply. The cost is being paid by the world’s poorest phone buyers.
The last few decades democratised computing. Cheap smartphones connected hundreds of millions of people to the internet. That trend has reversed. The long arc of consumer electronics getting faster, cheaper, and more powerful every year is over. The people who will feel it first and worst are the world’s poor. The rest of us are next.
