AI’s memory appetite starves budget phones: mid‑range makers feel the squeeze

AI demand is eating mobile memory capacity

The AI server boom is reallocating memory-chip capacity away from smartphones, and budget phones are paying the highest price. It has been reported that major memory manufacturers — Samsung, SK Hynix and Micron — are prioritizing high‑bandwidth server DRAM for AI infrastructure built by Meta, Google and Microsoft, squeezing the wafer starts available for mobile DRAM and NAND. TrendForce data shows spot prices for mobile storage have leapt more than threefold in recent months, and industry voices call the disruption “a tsunami” for the phone supply chain.

Flagships weather it; cost‑sensitive brands do not

High‑end vendors have more cushion. Apple’s iPhone continues to post record results, and Samsung’s shipments remain strong. By contrast, Xiaomi (小米), OPPO (OPPO), vivo (vivo), Honor (荣耀), Meizu (魅族) and overseas‑focused Transsion (传音) are reporting margin pressure, order cuts and, reportedly, even product delays. It has been reported that Meizu cited runaway memory prices as a reason new models could not be commercialised; Transsion warned that component inflation drove a halving of net profit. UBS and others note memory’s share of total BOM has climbed noticeably for both flagship and midrange models, but the jump is far more acute in mid‑tier devices where memory once represented roughly 20% of cost and has surged toward a third.

Tough choices ahead — raise price, reduce config, or shrink margins

Mid‑range phones compete on “big memory at low price.” Now they face three bad options: cut base RAM back to 8GB and cede a key sales pitch; raise prices and lose extremely price‑sensitive buyers (studies show 65% price sensitivity in the ¥1,000–3,000 band); or absorb costs and collapse already thin margins. It has been reported that some vendors are preparing to roll back to lower base configurations in 2026. Complicating matters, longer handset replacement cycles and stronger demand for last‑generation flagships mean demand growth for mid‑range devices is weak — structural forces that the AI memory surge is merely amplifying.

Geopolitics and the longer view

This is not only a commercial story but a geopolitical one. US export controls and the global balance of fabs and IP have already shaped supplier strategies; it has been reported that domestic Chinese suppliers are tilting shipments toward Huawei (华为) where national policy and commercial incentives align. As long as hyperscalers pour billions into AI data centres, server memory will remain the premium allocation. For mid‑tier players, survival will depend on negotiating power with suppliers, nimble product strategy, and whether governments and industry can rebalance capacity — or whether the mid‑market simply consolidates around brands that can absorb the shock.