AI memory chip demand reshapes India’s smartphone market with 10% shipment drop

India’s smartphone market, the world’s second-largest by shipments, experienced a 10% year-over-year decline in Q2 2026, marking the steepest June-quarter drop in six years, according to Counterpoint Research. Analysts attribute the slowdown to a shortage of memory chips—RAM and storage components—that are also in high demand for AI data centers. Chipmakers including Samsung, SK Hynix, and Micron have shifted production capacity toward high-bandwidth memory for AI accelerators, which are more profitable per wafer than standard memory used in phones and laptops. This shift has reduced supply and driven up costs for consumer electronics, disproportionately affecting price-sensitive markets.

The impact has been most pronounced in India, where about 60% of the smartphone market is concentrated in the sub-₹20,000 (under $210) segment. Tarun Pathak, vice president of research at Counterpoint, told TechCrunch that higher memory costs have pushed handset prices up by between 4% and 68% depending on the model. Consumers have responded by delaying upgrades, stretching replacement cycles from about 3.5 years to around four years, while turning to higher-priced devices, financing options, or the secondhand market to manage affordability.

The uneven impact is reshaping competition. Samsung was the only major brand to post shipment growth in India during the quarter, with volumes rising 2% year-over-year, while Apple saw a 3% decline largely due to supply constraints. Shipments in the sub-₹15,000 (under $150) segment fell 45% year-over-year, and Chinese brands—heavily exposed to entry- and mid-tier devices—saw their combined market share drop to its lowest level since 2020.

Strategic shifts are already underway. OnePlus announced it would stop launching new products in Europe and North America, focusing instead on its India business, citing profitability as the deciding factor. Prachir Singh, a senior analyst at Counterpoint, noted that sub-brands typically require sufficient volume to cover shared costs, and thin margins make this untenable when component prices rise. Analysts expect the memory shortage and elevated smartphone prices to persist at least through the end of 2027, with price increases likely to moderate as consumers adjust to higher costs becoming the norm.