AI-driven memory crunch jolts India’s smartphone market

Months aft analysts warned that AI-driven request for representation chips would ripple done user electronics, India is providing the strongest grounds yet that the disruption has arrived, with rising handset prices reshaping the smartphone market.

The representation chips successful question — RAM and retention components — are the aforesaid ones tech giants request by the truckload to physique AI information centers. Manufacturers similar Samsung, SK Hynix, and Micron person been shifting accumulation capableness toward high-bandwidth memory, the specialized chips utilized successful AI accelerators, due to the fact that they’re overmuch much profitable per wafer than the modular representation utilized successful phones and laptops — leaving little capacity, and driving up costs, for mundane user electronics.

India, the world’s second-largest smartphone marketplace by shipments aft China, saw smartphone shipments autumn 10% year-over-year successful the April-June quarter, according to marketplace probe steadfast Counterpoint Research, marking the steepest June-quarter diminution successful six years arsenic higher representation costs pushed up handset prices.

The interaction has been much pronounced successful India than successful China, wherever smartphone shipments fell conscionable 2% successful Q2, according to Counterpoint. India has been deed harder due to the fact that astir 60% of its smartphone marketplace is concentrated successful the sub-₹20,000 (under $210) segment, wherever higher representation costs person had the biggest interaction connected prices, Tarun Pathak, the firm’s vice president of research, told TechCrunch.

India has been a salient marketplace for planetary smartphone brands for respective years. The South Asian nation, location to much than 1.4 cardinal radical and implicit 700 cardinal smartphone users, has go a bellwether for user request successful price-sensitive markets, making shifts successful buying patterns intimately watched by instrumentality makers, spot suppliers, and investors tracking the broader wellness of the AI proviso chain.

Pathak told TechCrunch that consumers are improbable to wantonness smartphones altogether. However, galore of them are expected to hold upgrades, stretching replacement cycles to astir 4 years from astir 3.5 years previously, portion premium brands specified arsenic Apple and Samsung stay amended insulated from the slowdown.

The uneven interaction is already reshaping contention among smartphone makers. Samsung was the lone large smartphone marque to station shipment maturation successful India successful Q2, with volumes rising 2% year-over-year, according to Counterpoint. Apple, by contrast, saw shipments autumn 3% — though that dip mostly reflected proviso constraints and inventory shortages limiting however galore iPhones Apple could deliver.

Consumers buying higher-end smartphones person proved little delicate to terms increases, with financing making costly devices much affordable, Prachir Singh, a elder expert astatine Counterpoint Research, told TechCrunch.

The symptom has been astir acute astatine the little extremity of the market. Shipments successful the sub-₹15,000 (under $150) conception fell 45% from a twelvemonth earlier, Counterpoint said. Because Chinese brands are heavy exposed to entry- and mid-tier smartphones, their combined marketplace stock fell to its lowest level for a 2nd calendar 4th since 2020.

The tougher economics are besides prompting strategical shifts. This week, Chinese smartphone marque OnePlus said it would halt launching caller products successful Europe and North America, portion maintaining its India business, pursuing what it described arsenic a cautious assessment. Counterpoint information shared with TechCrunch showed China accounted for 74% of OnePlus’ planetary smartphone shipments to distributors and retailers successful Q1, up from 59% a twelvemonth earlier, portion India’s stock fell to 19% from 30%.

In different words, OnePlus is retreating to markets wherever it tin inactive crook a nett and ceding crushed elsewhere — a signifier apt to repetition crossed different budget-focused brands arsenic margins tighten.

Indeed, Pathak told TechCrunch that moving respective sub-brands lone makes consciousness if each 1 sells capable measurement to screen shared costs, and that mathematics stops moving erstwhile margins get this thin. “Sub-brands usually person overlaps and shared resources, and you request a minimum basal to warrant the cut-throat margins. Profitability is the cardinal to deciding marketplace operations,” helium said.

Consumers consciousness the squeeze

That unit connected brands is trickling consecutive down to the radical buying their phones. Kiranjeet Kaur, subordinate probe manager for mobile phones probe astatine IDC, said the Indian smartphone marketplace is shifting from volume-led maturation to worth maturation — meaning less phones are being sold overall, but each 1 generates much gross — arsenic higher constituent costs marque lower-priced smartphones progressively uneconomical.

The higher constituent costs are already filtering done to consumers. Smartphone prices successful India person risen by betwixt 4% and 68%, depending connected the model, Pathak said, and arsenic prices rise, consumers are either moving to higher-priced devices, delaying upgrades, oregon turning to the secondhand market.

Financing has meantime go “central to affordability,” Kaur told TechCrunch. She added that brands and retailers were besides gathering inventory up of the festive play to fastener successful little costs earlier further increases successful constituent prices.

IDC besides expects India’s smartphone shipments to diminution by treble digits successful Q2, a steeper autumn than the 4.1% diminution successful the archetypal 4th and the 5.3% driblet successful the erstwhile quarter, Kaur said. However, she noted the firm’s estimates were not yet finalized.

Kaur told TechCrunch that representation shortages and elevated smartphone prices were apt to persist until astatine slightest the extremity of 2027, though the gait of terms increases should mean arsenic consumers gradually set to higher prices becoming the caller normal.

“For Indian consumers, it is simply a treble whammy arsenic the weaker currency makes imports costlier, which has added to borderline pressures for the marketplace players, and they are passing connected the outgo to the consumer,” Kaur said.