AI Memory Demand Squeezes Capacity, Shrinking Budget Smartphone Market

Explosive growth in generative AI and data centers has driven a sharp increase in demand for high-bandwidth memory (HBM). With such chips generating exceptionally high margins, semiconductor giants Samsung and SK hynix have shifted capacity toward AI-specific memory. That has left standard DRAM and NAND flash memory used in conventional smartphones in short supply, posing a severe challenge to budget handsets that are highly sensitive to component costs.

The latest industry research forecasts that global shipments of budget smartphones priced below $400 will fall by more than 22% year on year in 2026 as memory prices continue to rise. As the component supply-demand imbalance worsens, entry-level phones priced below $100, once common in the market, could disappear by the end of 2026. The trend shows that AI's displacement of production capacity is already having a tangible impact on mass-market consumers.