Budget Smartphones Face Extinction as Memory Price Surge Accelerates Polarization — Samsung Fights Back with In-House Strength — BigGo Finance

The record surge in memory semiconductor prices, sparked by the global AI boom, is triggering a tectonic shift in the smartphone market. According to the latest report from research firm Omdia, budget smartphones operating on razor-thin margins are now facing an “existential threat,” with global smartphone shipments projected to contract 12% year-over-year in 2026. The primary driver: a staggering 22% collapse in shipments of models priced under $400 (approximately ¥65,000).

However, Samsung Electronics (005930.KS) is turning this crisis into a competitive advantage. Armed with an “in-house buffer” as the world’s largest memory chip supplier, the company is strategically holding prices steady or even cutting them on budget models for emerging markets like India, even as rivals such as Apple (AAPL) and Xiaomi (1810.HK) are forced to raise prices. The smartphone market has now entered an unprecedented era of polarization, where the memory shortage is drawing a stark dividing line between winners and losers.

Memory Prices Slam Budget Phones as Memory Accounts for 60% of BOM

An Omdia report released in the second week of July lays bare the near-collapse of the business environment for budget smartphones. Currently, procurement costs for DRAM and NAND flash memory account for roughly 60% of the total bill of materials (BOM) for smartphones priced under $400. For entry-level models under $99, that figure exceeds an extraordinary 64%.

“The rise in memory costs has become a serious existential threat for budget smartphones,” Omdia noted. “Given the projected trajectory of memory prices over the coming quarters, entry-level products are already becoming unprofitable, and face significant risk of a sharp drop in consumer demand as retail prices continue to climb.”

Premium smartphones have room to cut costs elsewhere by switching to older-generation processors or adopting cheaper display and camera configurations. But budget phone makers, already operating on extremely thin margins, have almost no “cost-cutting headroom” left. Many manufacturers, including popular Chinese brands like Oppo and Xiaomi, are being forced to raise retail prices just to maintain minimum profitability.

Counterpoint Research analyst Shenghao Bai also believes significant price hikes in 2026 are unavoidable. “Standard cost-reduction measures will only have limited effect, making retail price increases inevitable,” he analyzed. “We expect increases of around $30 in the budget segment and $150 to $200 for some premium flagship models.”

In contrast to the overall market contraction, shipments of smartphones priced above $400 are expected to grow 5.7%, underscoring the rapid polarization underway.

Samsung’s “In-House Shield” Pays Off in the Indian Market

Amid this harsh environment, Samsung’s strategy stands out. While its mobile division is obligated to procure memory at market prices like its competitors, the group as a whole is a “net winner” from the surge in semiconductor demand, giving it a structural advantage in price competition.

According to sources cited by the Korea JoongAng Daily, Samsung’s semiconductor and smartphone divisions have long-term contracts in place, allowing the mobile business to avoid the memory supply risks facing rivals and meet its shipment targets. However, the source added, “Since no one knows when this memory crisis will end, it is unclear how long Samsung can sustain this strategy.”

This advantage is particularly evident in the Indian market. Samsung’s latest budget 5G model, the Galaxy M47 5G, has been highly praised locally for offering specifications exceeding its price point. In comparisons with the competing Realme 16T, a reversal has occurred where Samsung’s device offers superior specs at a lower price. For Samsung’s budget models, long criticized as “overpriced,” this marks a notable turning point.

Meanwhile, Chinese manufacturers including Xiaomi, Oppo, Vivo, and Meizu are being forced to downgrade shipment forecasts or cancel new product launches entirely due to the memory shortage. The retreat of Chinese players from the budget segment is providing a significant tailwind for Samsung.

Price Hike Wave Looms in Premium Market Too — Diverging Fortunes for Apple and Samsung

Even in the high-end market, the impact of rising memory costs can no longer be ignored. According to Counterpoint Research, DRAM’s share of total cost for premium smartphones jumped 6 percentage points from Q1 to Q2 2026, reaching 23%. DRAM prices surged more than 50% quarter-over-quarter in Q1 alone.

Apple CEO Tim Cook has signaled price increases for the new iPhones set to launch this fall. The company has already raised prices on many Macs and iPads by up to $300, and Cook warned that “it is becoming difficult to continue absorbing the cost increases from the memory shortage internally.”

Apple’s dilemma extends beyond pricing. According to supply chain analyst Ming-Chi Kuo, the iPhone 18 and iPhone 18e, slated for release next spring, are expected to feature only 9GB of RAM — a mere 1GB increase over their predecessors. This capacity is insufficient to run key Apple Intelligence features in iOS 27, such as customized Siri voice expressions and improved speech-to-text accuracy. These features require a minimum of 12GB of RAM, meaning non-Pro users will be forced to accept significant limitations on AI functionality.

The news has spread disappointment among Apple users, as expectations had been for 12GB of RAM in the iPhone 18 and 16GB in Pro models had the memory crisis not intervened.

Samsung is set to unveil its new foldable Z Fold 8 series at an Unpacked event later this month. On the closely watched pricing front, the base model of the traditional successor, the Z Fold 8 Ultra, is expected to start at $2,100 — a $100 increase over the previous generation. The 512GB model will see a $180 increase, and the 1TB model a $280 jump. Meanwhile, the newly introduced landscape-orientation Z Fold 8 is widely expected to be priced at $1,799 for the base model, seen as a countermeasure against Apple’s first foldable iPhone, which is anticipated to launch above the $2,000 mark in September.

Memory Shortage to Linger — Relief Not Expected Until After 2027

An end to the memory price surge is not in sight anytime soon. Meritz Securities analyst Kim Sun-woo noted, “Total DRAM supply growth in 2027 is expected to be limited to 20-25%, falling far short of the 50-70% increase anticipated in server demand. Production will continue to concentrate on high-end AI memory, and the price surge for low-cost legacy memory will likely continue until at least the end of next year.”

New memory production capacity is not expected to come online until 2027 at the earliest, and major manufacturers such as Samsung, SK hynix (000660.KS), and Micron Technology (MU) are showing no signs of shifting focus away from high-value AI memory.

Alex Baldock, CEO of Currys, the UK’s largest electronics retailer, warned that “consumers should brace for further price increases on smartphones and laptops later this year.” Microsoft (MSFT) has already announced a $100 to $150 price hike on Xbox consoles starting August 1, while Valve has set the starting price of its highly anticipated new Steam Machine gaming PC at $1,049. Dell and Lenovo also raised product prices across the board by 15-20% from late last year into early this year.

The trials brought by the memory shortage are fundamentally reshaping the structure of the smartphone industry. The contraction of the budget market, the concentration on the premium segment, and Samsung’s counteroffensive backed by in-house strength — the semiconductor battle of the AI era is relentlessly reverberating through the prices and features of devices that reach consumers’ hands.