Budget smartphone sales collapse 22% as memory costs hit 64% of BOM amid HBM supply crunch

Global budget smartphone shipments (sub-$400 devices) will plummet over 22% this year, dragging the entire smartphone market down 12% year-over-year, according to Omdia research. The culprit: skyrocketing DRAM and NAND flash memory contract prices that have turned razor-thin phone margins into an impossible equation. In sub-$100 ultra-budget phones, memory now comprises a staggering 64% of the total bill of materials (BOM), up from roughly 30% in Q3 2025—manufacturers have no money left for processors, screens, batteries, or cameras.

Memory makers SK hynix, Samsung, and Micron have aggressively redirected manufacturing capacity away from commodity smartphone memory toward high-bandwidth memory (HBM) to capture high-margin AI data-center demand. Handset makers like Xiaomi, OPPO, Vivo, and Transsion have zero structural wiggle room left to absorb costs; raising retail prices from $150 to $220 on entry-level models evaporates demand among price-sensitive buyers. Facing unviable economics and weak demand, vendors are quietly retreating from the bottom of the market to focus on higher-margin brackets.

Above $400, smartphones will grow 5.7% this year, but mid-range makers are forced to trade memory costs for other hardware cuts: stepping down from LTPO OLED to LTPS panels, reusing previous-generation SoCs, and dropping redundant camera lenses. Premium phones face direct price hikes. Relief from South Korea's $870 billion 10-year investment framework to double national memory output won't arrive in time to save this year's cycle.