Indian consumers looking to buy a new smartphone in 2026 should brace themselves for a significant hit to their wallets. A severe global shortage of memory chips, fueled by the explosive demand for artificial intelligence (AI) data centers, is set to drive manufacturing costs and retail prices sharply higher across the industry.
Steep Price Hikes and Falling Shipments Forecast
According to the latest analysis from Counterpoint Research, the average price of smartphones is now expected to climb by 6.9% year-over-year in 2026. This forecast is nearly double previous estimates and signals a major shift for the market. Compounding the issue, the research firm predicts that global smartphone shipments will actually decline by 2.1% next year. This marks a stark reversal from the estimated 3.3% growth projected for 2025.
The root cause of this impending price surge is a critical component found in both advanced AI servers and everyday mobile devices: DRAM memory chips. Companies racing to build AI infrastructure are creating massive supply bottlenecks, pulling chips away from the consumer electronics sector. As a result, memory prices are projected to rise by an estimated 40% through mid-2026.
Budget and Mid-Range Segments to Bear the Brunt
The memory crunch will not affect all smartphones equally. Counterpoint's data reveals that the most dramatic cost increases are already impacting the most affordable devices. The bill of materials for budget phones priced under $200 has skyrocketed by 20-30% this year. Mid-range and premium devices have also seen substantial cost hikes of 10-15%.
The situation is expected to worsen in the coming year, with an additional 8-15% increase in manufacturing costs anticipated in the first half of 2026. This puts immense pressure on brands that compete in the value segment.
"In the lower price bands, steep price increases on smartphones are not sustainable," explained Counterpoint Senior Analyst Yang Wang. "If cost pass-through isn't possible, OEMs will start pruning parts of their portfolios—that's actually what we are starting to see with significantly reduced volumes of low-end SKUs."
To cope, many manufacturers are already taking drastic steps. These include downgrading specifications for cameras, displays, and audio components, or reusing older part designs. Another common strategy is to steer customers toward more expensive "Pro" or premium models where profit margins can be better protected.
Apple and Samsung Most Resilient, Chinese Brands Face Challenges
The research indicates that industry giants Apple and Samsung are in the best position to weather this supply storm. They are forecast to see shipment declines of only around 2%. In contrast, Chinese smartphone makers like Honor, Oppo, and Vivo are likely to face steeper challenges. Honor, in particular, could experience shipment declines exceeding 3%.
For the average Indian consumer planning an upgrade, the message from this analysis is clear. The smartphones of 2026 will likely carry higher price tags while offering fewer meaningful improvements, especially in the budget and mid-range categories. The era of getting more features for less money is facing a serious interruption, all thanks to the world's insatiable appetite for AI computing power.
