That $100 phone you were going to grab for your kid’s first device or hand down to grandma could soon become nothing more than a dream. The rapid rise in demand for memory chips driven by artificial intelligence (AI) has made the entire budget phone category increasingly difficult to sustain.
So how bad are we actually talking?
According to research firm Omdia, memory costs for phones priced under $100 are projected to surge an astounding 400% by the third quarter of 2026. If this projection holds true, the bill of materials for the most common configurations will jump from just $14 a year ago to roughly $70, as reported by the South China Morning Post.
Samsung
Omdia’s senior research manager, Jusy Hong, provided a stark overview of the situation, stating that current memory prices have already surpassed what the total bill of materials for budget smartphones looked like just a year ago. Her conclusion was blunt: “It is impossible to manufacture smartphones below USD $100 at the moment… [or] in the near future.” This trend suggests that vendors are likely to abandon the budget segment entirely in favor of mid-range devices, even though real consumer demand remains unmet.
Motorola
Why is this happening now, and who’s getting hit hardest?
The primary culprit for this upheaval can be directly attributed to AI. Memory chip manufacturers have shifted their focus toward producing high-capacity chips to accommodate AI servers and data centers, effectively starving the supply of cheaper chips that budget phones and the consumer electronics industry typically rely on.
The impact of this shift is reflected in the rising average smartphone prices, which reached $577 in Q1 2026—a 12% increase year-over-year. As a result, the market is experiencing a slowdown, with Q2 global shipments seeing a 4% decline. Omdia predicts a full-year decline of 12% in overall smartphone shipments, with budget devices facing the most severe contraction, dropping 22% for models priced under $400.
Andy Boxall / Digital Trends
Brands like Vivo have already increased the price of their iQOO 15’s higher storage configuration by 1,500 yuan. Meanwhile, Oppo and Xiaomi reported double-digit declines in shipments last quarter, according to IDC. Omdia’s Zaker Li mentioned that manufacturers are stripping down displays and camera specifications in an attempt to offset these costs, but rising prices elsewhere are leaving little room for maneuvering, ultimately forcing retail increases.
Hong remains optimistic that the ultra-cheap smartphone segment may eventually return once memory prices stabilize, but that may not occur for at least another year or so.
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