The booming global demand for artificial intelligence (AI) memory chips is causing significant ripples across the consumer electronics sector, with India's smartphone market providing some of the clearest evidence of this disruption. Analysts had previously warned that the intense appetite for memory components crucial to AI data centres would lead to higher costs for standard memory chips used in devices like smartphones and laptops. This shift in production priorities by major manufacturers, including Samsung, SK Hynix, and Micron, towards more profitable high-bandwidth memory for AI accelerators, has resulted in reduced capacity and increased prices for everyday consumer gadgets.
India, a critical bellwether for price-sensitive consumer demand and the world's second-largest smartphone market by shipments, has experienced a notable slowdown. In the April-June quarter, smartphone shipments in the country fell by 10% year-on-year, marking the steepest decline for a June quarter in six years, according to market research firm Counterpoint Research. This downturn is largely attributed to the escalating cost of memory components, which has translated into higher handset prices for consumers.
The impact in India has been more pronounced than in other major markets, such as China, where smartphone shipments saw a comparatively smaller 2% decline in the same period. This disparity is due to India's market concentration, with approximately 60% of its smartphone sales occurring in the sub-£200 segment. In this price-sensitive tier, even modest increases in memory costs have a substantial effect on overall device pricing, making upgrades less accessible for many consumers.
While consumers are unlikely to abandon smartphones entirely, the rising costs are expected to influence purchasing patterns. Many are predicted to delay upgrading their devices, extending typical replacement cycles from around 3.5 years to approximately four years. This trend is having an uneven impact on smartphone manufacturers, with premium brands like Apple and Samsung proving more resilient. Samsung was notably the only major brand to report shipment growth in India during Q2, with volumes increasing by 2% year-on-year, while Apple saw a 3% decline, though this was largely due to supply constraints.
The tougher economic landscape is also prompting strategic realignments among smartphone companies. Chinese brand OnePlus recently announced a significant shift, stating it would cease launching new products in Europe and North America to focus on its Indian business. This decision follows a careful assessment of market conditions, with data showing China accounted for 74% of OnePlus' global smartphone shipments in Q1, up from 59% a year earlier, while India's share dropped from 30% to 19%. This strategic retreat to core profitable markets is a pattern likely to be replicated by other budget-focused brands as profit margins tighten across the industry.