Memory makers have redirected wafer production from smartphone DRAM to AI chips. LPDDR prices have surged 250%. India’s sub-$100 phone market has collapsed 59%. The cheap smartphone as we know it is dying — and AI is the cause.
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 smartphone that costs less than $100 has more computing power than that machine. For decades, the path of consumer electronics has been clear: faster, cheaper, better, every year.
That path has now reversed. AI’s insatiable demand for memory has fundamentally reshaped the semiconductor industry. LPDDR5X memory — the same type that powers your phone — is now being bought in enormous quantities by data centre operators building AI infrastructure. Nvidia alone consumes more LPDDR than several major smartphone manufacturers combined.
Apple negotiated multi-year memory agreements to lock in prices, but its most recent contract expired in January 2026. Memory makers refused anything longer than quarterly pricing. In February, Apple agreed to pay Samsung a 100% premium on LPDDR5X memory for the iPhone. Over the course of 2025, the 12GB chips powering the iPhone 17 Pro increased in price by 230%.
The impact is already visible in the budget phone market. Brands that relied on thin margins and affordable components are being squeezed. India’s sub-$100 phone segment has collapsed by 59% as manufacturers struggle to maintain profitability. The trend is expected to spread to other emerging markets.
Hyperscalers like Microsoft and Google are prepared to outbid phone manufacturers for DRAM allocation. Executives from both companies reportedly spent late 2025 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 acknowledged this week that “the benefits of AI must also go to the general 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.
