Sub-$100 smartphone shipments plunge 60% as AI devours memory chip supply

The sub-$100 smartphone is vanishing. Shipments of the cheapest handsets fell nearly 60% year-over-year in the second quarter of 2026, as artificial intelligence's insatiable demand for memory chips reshapes the economics of consumer electronics from the factory floor to the retail shelf.cnbc

Chipmakers Choose AI Over Cheap Phones

Some 173 million smartphones priced below $100 were shipped globally in 2025, but that segment is now in freefall. Memory makers including Samsung, SK Hynix ↗ 0.95%, and Micron ↘ 4.90% have been funneling manufacturing capacity toward high-bandwidth memory used in AI data centers, tightening supply for the conventional DRAM and NAND chips that go into phones and laptops. Smartphone memory prices surged more than 80% quarter-on-quarter in the second quarter, according to Counterpoint Research, and memory now accounts for close to 60% of the bill of materials for phones priced below $200.ajupress+2

"Low-end phones are becoming uneconomic to manufacture," IDC Vice President Bryan Ma told CNBC Comcast Corporation ↗ 2.36%. Global smartphone retail prices have risen an average of 15% so far this year, while newly launched devices are 25% more expensive than comparable models a year earlier, according to Counterpoint. IDC projects worldwide smartphone shipments will decline sharply in 2026, falling to roughly 1.09 billion units.cnbc+2

Samsung's Unusual Buffer

Samsung Electronics stands apart. A Mizuho Securities report cited by The Korea Herald noted that Samsung's vertically integrated structure lets its semiconductor division profit from the same price increases squeezing its handset business. Samsung's Device Solutions division posted an operating profit of 89.2 trillion won in the second quarter, buoyed by rising memory prices and AI server chip demand, even as its mobile and networks divisions recorded an operating loss of about 700 billion won.globalsources

Samsung's market share rose to 24% in the second quarter from 20% a year earlier, and its shipment volume is expected to hold steady at around 240 million units this year, according to Mizuho. The company is leaning into premium devices like the Galaxy Z Fold8 and S26 series, a strategy mirrored by Chinese rivals. Xiaomi's average selling price has climbed roughly 30% since 2023 to $197, while its sub-$100 share of shipments collapsed from 27.7% in the first half of 2025 to 11.2% a year later.cnbc+1

Consumers Hold On Longer

The pricing pressure is changing consumer behavior. Counterpoint expects the global smartphone average selling price to reach $450 this year, a 22% increase, while buyers delay upgrades, choose lower storage configurations, or turn to refurbished devices. Replacement cycles are lengthening as the cost of switching rises.ajupress

"As prices continue to rise and more premium phones enter the market, replacement cycles will inevitably get longer," Sejong University professor Hwang Yong-sik told Aju Press. Even if the memory crunch eventually eases, IDC's Ma cautioned, "that just means that the price increases moderate," not reverse.cnbc+1