AI Chip Demand Drives Up Indian Smartphone Prices

AI's insatiable demand for memory chips has arrived in India's consumer electronics market, leading to higher smartphone prices. Manufacturers are prioritizing AI data center needs, diverting capacity from standard memory chips used in phones. This shift has caused a 10% year-over-year decline in India's smartphone shipments during the April-June quarter, the steepest June-quarter drop in six years.

The impact is particularly severe in India's sub-₹20,000 smartphone segment, making up 60% of the market. Higher memory costs have disproportionately affected prices in this price-sensitive category. Consequently, consumers are expected to extend their phone upgrade cycles, possibly to around four years.

This economic pressure is reshaping competition, with premium brands like Apple and Samsung better insulated. Chinese brands, heavily reliant on the entry and mid-tier segments, have seen their market share decline. Some brands, like OnePlus, are adjusting their global strategy, retreating from markets like Europe and North America to focus on profitable regions.

The elevated component costs are directly impacting consumers, with smartphone prices rising significantly. Many are delaying upgrades or opting for the secondhand market, while financing plays a crucial role in affordability. Analysts predict these memory shortages and higher prices could persist until late 2027.