Months after analysts warned that AI-driven demand for reminiscence chips would ripple via client electronics, India is offering the strongest proof but that the disruption has arrived, with rising handset costs reshaping the smartphone market.
The reminiscence chips in query — RAM and storage elements — are the identical ones tech giants want by the truckload to construct AI knowledge facilities. Producers like Samsung, SK Hynix, and Micron have been shifting manufacturing capability towards high-bandwidth reminiscence, the specialised chips utilized in AI accelerators, as a result of they’re rather more worthwhile per wafer than the usual reminiscence utilized in telephones and laptops — leaving much less capability, and driving up prices, for on a regular basis client electronics.
India, the world’s second-largest smartphone market by shipments after China, noticed smartphone shipments fall 10% year-over-year within the April-June quarter, in response to market analysis agency Counterpoint Analysis, marking the steepest June-quarter decline in six years as increased reminiscence prices pushed up handset costs.
The impression has been extra pronounced in India than in China, the place smartphone shipments fell simply 2% in Q2, in response to Counterpoint. India has been hit more durable as a result of about 60% of its smartphone market is concentrated within the sub-₹20,000 (below $210) section, the place increased reminiscence prices have had the largest impression on costs, Tarun Pathak, the agency’s vice chairman of analysis, informed TechCrunch.
India has been a outstanding marketplace for world smartphone manufacturers for a number of years. The South Asian nation, residence to greater than 1.4 billion folks and over 700 million smartphone customers, has grow to be a bellwether for client demand in price-sensitive markets, making shifts in shopping for patterns carefully watched by gadget makers, chip suppliers, and buyers monitoring the broader well being of the AI provide chain.
Pathak informed TechCrunch that customers are unlikely to desert smartphones altogether. Nonetheless, lots of them are anticipated to delay upgrades, stretching substitute cycles to round 4 years from about 3.5 years beforehand, whereas premium manufacturers similar to Apple and Samsung stay higher insulated from the slowdown.
The uneven impression is already reshaping competitors amongst smartphone makers. Samsung was the one main smartphone model to publish cargo development in India in Q2, with volumes rising 2% year-over-year, in response to Counterpoint. Apple, against this, noticed shipments fall 3% — although that dip largely mirrored provide constraints and stock shortages limiting what number of iPhones Apple may ship.
Customers shopping for higher-end smartphones have proved much less delicate to cost will increase, with financing making costly units extra inexpensive, Prachir Singh, a senior analyst at Counterpoint Analysis, informed TechCrunch.
The ache has been most acute on the decrease finish of the market. Shipments within the sub-₹15,000 (below $150) section fell 45% from a yr earlier, Counterpoint mentioned. As a result of Chinese language manufacturers are closely uncovered to entry- and mid-tier smartphones, their mixed market share fell to its lowest stage for a second calendar quarter since 2020.
The harder economics are additionally prompting strategic shifts. This week, Chinese language smartphone model OnePlus mentioned it will cease launching new merchandise in Europe and North America, whereas sustaining its India enterprise, following what it described as a cautious evaluation. Counterpoint knowledge shared with TechCrunch confirmed China accounted for 74% of OnePlus’ world smartphone shipments to distributors and retailers in Q1, up from 59% a yr earlier, whereas India’s share fell to 19% from 30%.
In different phrases, OnePlus is retreating to markets the place it may possibly nonetheless flip a revenue and ceding floor elsewhere — a sample more likely to repeat throughout different budget-focused manufacturers as margins tighten.
Certainly, Pathak informed TechCrunch that operating a number of sub-brands solely is sensible if each sells sufficient quantity to cowl shared prices, and that math stops working as soon as margins get this skinny. “Sub-brands usually have overlaps and shared sources, and also you want a minimal base to justify the cut-throat margins. Profitability is the important thing to deciding market operations,” he mentioned.
Customers really feel the squeeze
That strain on manufacturers is trickling straight right down to the folks shopping for their telephones. Kiranjeet Kaur, affiliate analysis director for cellphones analysis at IDC, mentioned the Indian smartphone market is shifting from volume-led development to worth development — which means fewer telephones are being offered total, however each generates extra income — as increased element prices make lower-priced smartphones more and more uneconomical.
The upper element prices are already filtering via to customers. Smartphone costs in India have risen by between 4% and 68%, relying on the mannequin, Pathak mentioned, and as costs rise, customers are both shifting to higher-priced units, delaying upgrades, or turning to the secondhand market.
Financing has in the meantime grow to be “central to affordability,” Kaur informed TechCrunch. She added that manufacturers and retailers had been additionally constructing stock forward of the festive season to lock in decrease prices earlier than additional will increase in element costs.
IDC additionally expects India’s smartphone shipments to say no by double digits in Q2, a steeper fall than the 4.1% decline within the first quarter and the 5.3% drop within the earlier quarter, Kaur mentioned. Nonetheless, she famous the agency’s estimates weren’t but finalized.
Kaur informed TechCrunch that reminiscence shortages and elevated smartphone costs had been more likely to persist till no less than the tip of 2027, though the tempo of worth will increase ought to reasonable as customers regularly alter to increased costs changing into the brand new regular.
“For Indian customers, it’s a double whammy because the weaker foreign money makes imports costlier, which has added to margin pressures for the market gamers, and they’re passing on the fee to the buyer,” Kaur mentioned.
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