DRAM prices are killing the cheap smartphone

personal tech

Now eats 60% of a sub-$400 handset's bill of materials and it's only getting worse

Rising memory prices are making budget smartphones commercially unviable to produce, forcing users to delay upgrades, pay more for higher-tier devices, or turn to the second-hand market instead.

This is according to analyst Omdia, which estimates memory costs accounted for almost 60 percent of the total bill of materials in sub-$400 smartphones during calendar Q1 of 2026 – and things haven't improved since then.

In fact, market watcher TrendForce predicted last month that the tech industry will see DRAM prices jump by another 50 percent or more in 2026, making it almost impossible for budget device makers to avoid passing on the component cost hike. 

To offset rising memory costs, manufacturers have tried switching to cheaper display panels, sensors, or radio frequency (RF) modules – but low-end phones are already built on such a tight cost structure that there's little room left to cut.

As with entry-level PCs, this means vendors can no longer supply them at a price to satisfy cost-conscious buyers, and sales are already declining. Omdia expects sub-$400 smartphone shipments to drop 22 percent year-on-year in 2026.

For other segments, where memory doesn't account for such a large proportion of the bill of materials, manufacturers have room to make trade-offs. Omdia believes that while the total global smartphone market will decline by 12 percent in 2026, the above-$400 segments will remain resilient and are actually expected to see shipments grow 5.7 percent.

In response, smartphone makers are shifting production priority toward mid-to-high-end phones. For devices priced above $600, higher-performance system-on-chip (SoC) components, displays, and camera units account for a larger share of the total cost, giving vendors room to trim spending elsewhere and absorb some of the memory cost burden.

Omdia says China-based manufacturers are reverting to LTPS (low-temperature polycrystalline silicon) display panels in some models that upgraded to the newer LTPO (low-temperature polycrystalline oxide) tech, reserving the latter for premium models. This can save $3 to $5 per device.

Other trade-offs include reducing the number of cameras, using smaller image sensors, or switching to previous-generation SoCs, which can reduce costs by around 30 to 40 percent.

In other words, buyers can expect to get a less capable device than they might previously have expected at a given price point this year, all thanks to the AI bubble causing a run on memory chips. Small wonder that memory manufacturers such as Samsung are raking in the cash, while consumers pay the price.

It's also no surprise that buyers are choosing to hold onto smartphones for longer, with an average lifetime of 4.2 years – a figure expected to stretch out to 4.7 years before the end of the decade.

The market for pre-owned phones is also growing, with a 12 percent increase in trade forecast for this year as many consumers seek to get a more premium device at a lower price. ®