From CNBC · Celestine Iyer · · 1m 30s
The $100 phone is disappearing
AI servers are eating the memory chips that made cheap phones possible, and budget handsets are vanishing from the shelves.
In brief
AI servers are eating the memory chips that made cheap phones possible, and budget handsets are vanishing from the shelves. Memory shortages driven by AI have made entry-level phones unprofitable to build, so the whole market is drifting up-market and prices are not coming back down. Originally reported by CNBC.
The cheap phone is vanishing
173 million phones under $100 shipped worldwide last year. In the second quarter of 2026, that segment fell almost 60% from a year earlier, according to IDC.
“The days of the sub-$100 smartphone may be numbered”
AI is eating the memory
Chipmakers are pushing capacity toward high-value memory for AI data centers. That squeezes the supply going into phones and drives the cost up.
Memory is now most of the cost
On phones priced under $200, memory alone accounts for nearly 60% of the bill of materials, says Omdia's Chow Sheng Win. The math no longer works.
“Low-end phones are becoming uneconomic to manufacture”
Xiaomi walks up-market
Sub-$100 models were 27.7% of Xiaomi's global shipments in the first half of 2025. A year on, just 11.2%. Its average selling price has climbed about 30% since 2023, to $197.
A $1,640 folding phone
Xiaomi's new 18 Fold starts at 10,999 yuan, roughly $1,640, aimed straight at the premium buyer. In mainland China, under 20% of its volume now sells below $200.
Prices are not coming back
Counterpoint's Neil Shah sees no return to 2024 levels, since memory makers have little reason to build capacity for the low end. Relief would only slow the rise.
“that just means that the price increases moderate”
The short version
Memory shortages driven by AI have made entry-level phones unprofitable to build, so the whole market is drifting up-market and prices are not coming back down.
