Are cheap smartphones on the way out?
The latest research from Omdia shows that global shipments of smartphones priced under $400 are expected to fall by more than 22 per cent this year. The main reason is the sharp rise in the cost of memory components, which account for an ever-increasing proportion of total production costs.
For smartphones priced under $400, memory now accounts for almost 60 per cent of material costs. For the very cheapest handsets, this figure rises to over 64 per cent. Manufacturers are still trying to absorb these extra costs by cutting back on components such as screens, cameras or wireless modules, but there is hardly any scope left for this with budget phones. After all, these are already assembled as cost-effectively as possible.
As a result, several manufacturers are choosing to gradually shift their focus towards more expensive models. According to Omdia, brands including Xiaomi, Oppo, vivo, Honor and Transsion are among those raising their prices or scaling back their presence in the budget segment to maintain profit margins.
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The situation is different for premium smartphones. Although memory prices have risen in this segment too, these components account for a much smaller proportion of total production costs. Manufacturers can also make savings by, for example, using an older processor, opting for a cheaper screen or adjusting the camera specifications. As a result, the higher-end segment remains more profitable.
Omdia therefore expects a clear shift in the smartphone market. Whilst the overall market is expected to shrink by 12 per cent in 2026, smartphones priced above 400 dollars are projected to grow by 5.7 per cent. According to the researchers, this is not only because manufacturers are focusing more on the higher-end segment, but also because buyers of more expensive smartphones are less sensitive to price rises.
For you as a consumer, this could mean that the range of affordable smartphones will shrink in the near future and that prices in the budget segment will rise further. Manufacturers seem to be increasingly opting for devices with higher profit margins, whilst the development of truly cheap smartphones is becoming increasingly difficult due to rising memory costs.
