The third quarter proved to be the weakest in the last fourteen years, with global smartphone shipments shrinking due to a lack of microchips. The growing demand for artificial intelligence (AI) is even affecting the cost of mobile devices. India is projected to see a 20% drop in shipments during the third quarter. Consequently, it may be difficult for buyers of budget models in the near future.
If you plan to purchase a new smartphone, you might have to spend more money. Manufacturers offering devices with improved cameras, larger RAM, and increased storage are facing a problem: the necessary microchips are becoming more expensive. This directly impacts the overall cost of the phone, its price, and the range of available models on the market.
Recent reports from the global smartphone market point specifically to this issue. According to preliminary estimates by Counterpoint Research, the volume of worldwide smartphone shipments between July and September 2026 decreased by 20% compared to the same period last year. This marked the lowest figure for the third quarter since 2012, meaning the market has not experienced such a weak state in approximately 14 years.
However, this news does not only affect mobile phone manufacturers. It is directly relevant to consumers aiming to buy a new device in the price range of 10,000 to 20,000 rupees. The question arises: why is there a chip shortage for phones, how is this related to AI, and could buying a smartphone in the near future become even more expensive?
At the heart of this problem are two types of microchips. The first is DRAM, used in the phone's random access memory. The second is NAND flash memory, designed to store photos, videos, applications, and other files. Currently, companies involved in AI are actively building large data centers. These centers require enormous amounts of memory and other chips for training and running AI models. Furthermore, the demand for high-performance memory used in AI-related tasks has sharply increased. Chip manufacturers are concentrating their production capacity on more profitable products, which increases pressure on the prices and supply of memory used in smartphones.
It is important to understand that AI data centers do not purchase all the memory for phones directly. The issue lies in limited production capacity and the growing demand for various types of memory. Under these conditions, phone manufacturers have to acquire the necessary chips at higher prices than before.
The cost of a smartphone is determined by the expenses for numerous components, including the screen, processor, camera, battery, and memory. When the price of memory rises, the total manufacturing costs for the phone also increase. Companies face two options: either they absorb the increased costs or partially pass them on to consumers. In the current market, many companies are trying to manage these costs by raising prices or reducing the supply of less profitable models.
According to Counterpoint Research data, global retail prices for smartphones rose by approximately 20% in 2026 amid rising memory prices and supply issues. However, it should be noted that this is global statistics, and the 20% increase cannot be automatically applied to all phones sold in India; the price impact may vary depending on the model and the local market.
This phenomenon is felt more strongly in India because a significant portion of customers here purchase phones with limited budgets. Based on Counterpoint Research data, smartphone shipments in India declined during the second quarter of 2026. Due to the increased cost of devices and weakening demand, companies are forced to change their market strategy.
Counterpoint Research forecasts that smartphone shipments in India could fall by 20% year-on-year between July and September 2026. This is only a preliminary estimate and not a final indicator of the entire Indian quarterly market. According to the report, due to expensive phones and weak consumer activity, companies were more cautious about replenishing stocks before the holidays.
There is an important distinction: shipments refer to phones sent by manufacturers to markets and distribution channels, not the number of units purchased by customers. If companies send fewer devices, it can affect product availability in stores. But a 20% drop in shipments does not mean that every buyer in India reduced their purchases by 20%.
Interestingly, despite the overall market decline, the situation for all companies was different. According to preliminary data from Counterpoint Research, Samsung maintained the top spot in the global market in the third quarter of 2026 with a market share of 23%. Although the company's shipments decreased by 3% compared to last year, its share increased. This was helped by high demand for foldable phones and better chip availability for some models.
