The shortage of AI components threatens to wipe out smartphones in the sub-10 million VND segment.
The boom in artificial intelligence infrastructure is driving up RAM prices, putting budget phones at risk of being discontinued or experiencing significant price increases.
The global mobile market is facing a major turning point as the budget smartphone segment (under $400, equivalent to approximately 10 million VND) is at risk of a sharp decline. According to the latest report from technology research firm Omdia, the number of devices in this segment is expected to decrease by about 22% from the second half of this year, with this trend continuing until 2027.
Pressure from the supply chain of components for AI.
The root cause of this situation stems from the global explosion of artificial intelligence (AI). Building and operating high-speed AI infrastructure requires a massive amount of RAM, directly creating enormous pressure on the semiconductor supply chain. As demand from data centers surges, the supply of memory for consumer devices like smartphones becomes scarcer and more expensive.
Zaker Li, an analyst at Omdia, said that the cost of memory components for phones priced under $400 nearly doubled between Q3 2025 and Q1 2026. For higher-end devices, this increase even exceeded 100%.
Challenges for smartphone manufacturers
To cope with rising component prices, many manufacturers have tried to cut costs in other areas such as displays, image sensors, or radio frequency modules. However, experts believe there is not much room left for further reductions. When production costs exceed acceptable limits, maintaining low prices becomes an impossible task.
Major brands like Oppo, Vivo, Honor, Xiaomi, and Transsion are facing pressure to adjust their prices. Raising prices could lead to a drop in consumer demand, potentially resulting in many companies deciding to completely withdraw from the budget segment to protect their profits.
| Price segment | Market volatility forecast | Main features |
|---|---|---|
| Under $400 | 22% off | Heavily affected by RAM prices. |
| Over $400 | An increase of 5.7% | The preferred market segment of the brands. |
| Over $1,000 | Stable | Customers are less price-sensitive. |
The future of the global mobile market
Francisco Jeronimo, Vice President of Global Client Devices at IDC, stated that if memory costs account for half the price of a low-cost phone, continuing to sell that product line becomes unprofitable. Some manufacturers have begun considering abandoning the mainstream market to focus on higher-end models with better profit margins.
Omdia forecasts that the global smartphone market could shrink by about 12% this year compared to 2025, mainly due to a supply shortage in the low-cost segment. However, this situation could improve by the end of 2027 or early 2028, as the expansion of AI infrastructure gradually stabilizes and component supply recovers.
During this transition period, users tend to extend the lifespan of their current devices or accept paying more to own newer models. Conversely, flagship models like the iPhone 17 Pro Max or Samsung Galaxy S26 Ultra are still projected to maintain stable sales because this customer group is less affected by fluctuations in component costs.
