Sub-$100 smartphones becoming a rarity as AI memory prices soar

• Memory now represents almost 60% of the bill of materials for smartphones priced below $200, making low-end phones 'uneconomic to manufacture' according to IDC.
• Xiaomi's average selling price has risen approximately 30% since 2023 to $197, while Oppo's has increased similarly to $300, with less than 20% of Xiaomi's China volume now below $200.
• Analysts expect prices will not return to 2024-2025 levels as memory manufacturers have little incentive to add capacity for the low-end market, even if supply constraints ease.

Summary: Sub-$100 Smartphones Declining as AI Drives Memory Costs Higher

Key Developments:

The budget smartphone market is experiencing a dramatic contraction due to soaring memory prices driven by AI demand. Global shipments of sub-$100 smartphones fell nearly 60% year-over-year in Q2 2026, following total shipments of 173 million units in 2025.

Company Impact:

Chinese manufacturer Xiaomi has seen significant pricing shifts, with sub-$100 devices dropping from 27.7% of global shipments in H1 2025 to under 20% of mainland China volume by 2026. The company's average selling price has surged approximately 30% since 2023 to $197. Competitor Oppo experienced similar increases, with average prices climbing 30% to $300. Xiaomi recently launched its premium 18 Fold model at 10,999 yuan ($1,640), signaling its upmarket pivot.

Market Drivers:

AI infrastructure demands have caused chipmakers to prioritize higher-value memory products, constraining smartphone memory supplies. Memory costs now represent nearly 60% of the bill of materials for smartphones under $200, making low-end devices "uneconomic to manufacture," according to IDC Vice President Bryan Ma.

Market Implications:

The smartphone industry is undergoing "premiumization" as manufacturers prune unprofitable budget models. Analysts indicate prices are unlikely to retreat to 2024-2025 levels, as memory manufacturers lack incentive to expand low-end capacity. Even if supply pressures ease, experts expect price increases to moderate rather than reverse. Chinese vendors maintain some cushion through domestic internet services and app revenues, but the structural shift toward premium devices appears permanent.