The AI buildout is no longer just raising the price of flagship phones. According to a new Rest of World report, it is deleting the world's cheapest smartphones from the market entirely — a shift with consequences that reach from smartphone shelves in Lagos and New Delhi to digital-inclusion targets set for 2030.
The report's central finding: newly launched smartphone models are roughly 25 percent more expensive than last year, driven by a global memory chip shortage that AI data centers have created by absorbing the components. The world's cheapest devices, which operate on margins already measured in single dollars, are the first casualty. For more context on this story, see our ongoing AI news.
Prices Are Rising Everywhere, But Not Equally
The squeeze varies sharply by region. Rest of World reports that smartphone prices have risen 21 percent in India, 19 percent across Asia-Pacific, and 18 percent in the Middle East and Africa. In the United States, they have gone up by just 5 percent — a disparity that tracks where budget devices dominate sales and where premium devices absorb cost increases more easily.
The numbers on the ground are stark. In India, the 128GB Redmi 15C launched last December at 12,499 rupees (about $140); by June it was selling for 16,999 rupees (about $190), a 36 percent increase. In Southeast Asia, Oppo's sub-$100 phone shipments plunged 96 percent, and Vivo moved its main entry-level model above $100 in most markets.
In Africa, where 81 percent of smartphones shipped last year cost less than $200, shipments of sub-$100 phones fell 34 percent year over year in the second quarter of 2026. Globally, the 173 million sub-$100 smartphones shipped last year are now disappearing, according to the report.
Why AI Broke the Memory Market
The mechanism is straightforward supply reallocation. "There are three primary manufacturers of memory, and in late 2025, all of them pivoted the vast majority of their supply towards AI centers instead of consumer electronics," Ramon Llamas, research director in mobile devices at IDC, told Rest of World. "That left many companies scrambling for inventory. ... Scarcity of memory has driven up prices for memory, and those price increases have been passed on to the consumer."
The scale of AI's pull on the supply chain is hard to overstate. S&P Global has estimated that capital expenditure by US hyperscalers — Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX — will reach historic levels, and memory is one of the few components every AI data center consumes in enormous volume, both for accelerator-adjacent buffers and for the HBM stacks and DRAM that feed modern GPUs.
Chinese manufacturers, which built their global position on affordable, feature-rich phones, are responding by retreating from the bottom of the market. Chinese companies "would rather reduce investment in products below $150 or $200 and put more resources into higher-margin phones, branding, user experience, and AI," Ivan Lam, senior analyst at Counterpoint Research, told the publication. He added that he does not expect costs to return to their pre-2025 levels, and that "what used to be below $150 may become below $250, or even $300."
The trend corroborates a string of earlier reports: The Guardian documented the "RAMageddon" price crunch adding around £100 to the price of a new iPhone in September; CNBC reported Qualcomm launching AI-focused Android chips into a market visibly constrained by memory shortages; and Reuters flagged the AI-driven memory supply crisis as early as December 2025. An entry-level device now costs the poorest 20 percent of consumers the equivalent of 44 percent of their monthly income, and 76 percent for people in sub-Saharan Africa, according to GSMA's September report.
The Digital Divide Gets Wider
For the industry associations tracking connectivity goals, the timing is worst possible. GSMA, the global mobile industry association, had projected nearly 800 million more people would be using mobile internet by 2030. Claire Sibthorpe, head of digital inclusion at the group's nonprofit foundation, told Rest of World the group is concerned rising smartphone costs would affect that projection and widen the gap of digital inequality.
"We live in an increasingly digital world, and the proliferation of technologies such as AI is creating greater digital divides and inequities," Sibthorpe said. "Stakeholders are increasingly using AI to provide access to important services, but people won't be able to benefit without access to an internet-enabled phone and the internet."
The irony is pointed: the same technology boom that is supposed to democratize access to intelligence is, at the component level, pricing the world's poorest consumers out of the devices required to use it.
What Happens Next
For consumers in wealthy markets, the effect so far is a modest premium on mid-range and flagship devices. For first-time smartphone buyers — the hundreds of millions of people the mobile industry still expects to connect — the effect is binary: the sub-$100 category they depend on is contracting fast, from availability as well as price.
When smartphones remain available but become unaffordable, consumers make difficult sacrifices to stay online, Sibthorpe told the publication: delaying upgrades, borrowing or sharing devices, staying on older feature phones, or going offline entirely when a device breaks or is stolen. "Often, it means they won't have an internet-enabled device at all."
Memory makers show no sign of redirecting supply back to consumer electronics while AI demand continues to climb, and analysts do not expect pre-2025 pricing to return. Unless capacity expands faster than hyperscaler demand, the entry-level smartphone — the device that connected the majority of the world's new internet users over the past decade — may become the AI boom's least discussed casualty.
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