Budget-conscious phone shoppers could face challenges ahead, thanks in part to AI. Rising memory costs may lead to 22 percent fewer phones priced under $400 available through the rest of this year and into 2027, according to a new report released Tuesday from technology research firm Omdia.

While high-end devices such as the iPhone 17 Pro Max and Samsung Galaxy S26 Ultra remain priced well above $1000, buyers seeking more affordable options often choose lower-cost models. If manufacturers exit the under-$400 segment, those with limited budgets may feel the impact most.

Analyst Zaker Li noted that memory costs for phones in the lower price tier have nearly doubled from the third quarter of 2025 to the first quarter of 2026. For devices above $400, costs rose by more than 100 percent, per Omdia's Quarterly Smartphone Technology Trends report.

Li added that some firms are attempting to balance higher memory expenses by reducing spending on other parts like displays, sensors and radio frequency modules, which remain readily available. However, there is limited flexibility to maintain previous price levels amid fast-rising memory costs.

As Chinese manufacturers including Oppo, Vivo, Honor, Xiaomi and Transsion raise prices on their devices, cost-sensitive buyers may reduce purchases. With falling demand, companies could eventually halt production of entry-level phones, Li forecasts.

This outlook aligns with observations from CNET mobile managing editor David Lumb at Mobile World Congress in Barcelona in March. Rapid expansion of AI infrastructure is consuming memory supplies, as substantial RAM is required to support AI systems. The resulting global RAM shortage is driving up phone prices and raising the chance that firms will abandon budget models because margins become too thin.

"Some vendors are telling us that they are considering leaving that segment entirely, because if you sell a phone for $150, and half the cost is memory, where will you make money? There's no point in selling products, right?" Francisco Jeronimo, vice president for Worldwide Client Devices at IDC, told Lumb at MWC.

While AI systems demand extensive RAM for numerous operations, phones rely on it for storage and multitasking.

The outlook for low-budget phones

In the near term, Omdia projects the global phone market will decline 12 percent this year versus 2025, driven by the expected 22 percent drop in shipments of phones under $400.

Over the longer term, conditions should improve. IDC's Francisco Jeronimo told CNET in March that the RAM shortage should ease by fall 2027 or early 2028 once AI infrastructure expansion slows and additional RAM production comes online.

Meanwhile, consumers are likely to hold onto existing devices rather than pay more for upgrades, Forrester VP and principal analyst Dipanjan Chatterjee told Lumb. To address this, companies may promote non-phone products or enhance phone features to encourage purchases.

For buyers willing to spend more, Omdia forecasts shipments of phones over $400 will rise 5.7 percent this year. This continues prior trends where premium models such as the iPhone 17 Pro Max and Galaxy S26 Ultra sell steadily even during economic pressure, as their owners are less affected by financial shifts. Due to the RAM situation, manufacturers are emphasizing higher-end devices, and many consumers remain willing to pay more. The share of memory cost per device also falls notably on pricier phones, analyst Li said.