India's smartphone market is bracing for a slowdown next year as a persistent global shortage of memory chips is set to drive up component prices sharply, a trend highlighted by Business Standard. Memory prices are expected to rise by about 40% during January-June, putting pressure on manufacturers and, in turn, on consumer demand.
Higher component costs will push up the bill of material (BoM) for handset makers, translating into an 8-15% increase in production costs per device. This escalation is likely to be passed on to buyers, dampening demand across price segments.
Counterpoint Research director Tarun Pathak said the impact is expected to be pronounced in 2026. Entry-level smartphones priced below Rs 10,000-accounting for roughly 18% of the overall market-could see shipment volumes decline by more than 5%. Mid- and premium categories around the Rs 35,000 price point may face steeper pressure, with shipments likely to fall by an average of 12-16%.
Memory chips make up about 12-16% of a phone's BoM, making lower-priced devices more vulnerable to cost increases than mid- and high-end models. This comes at a time when overall shipment growth has already been subdued. Smartphone volumes have stagnated for the past two years, with shipments in the current year estimated at 153 million units, unchanged from the previous year. Volumes are expected to contract further in 2026.
In value terms, however, 2025 is projected to close with around 9% growth, driven largely by premiumisation and higher average selling prices. Looking ahead to 2026, value growth of 5-9% is expected, though this would be driven more by price hikes than by a shift towards premium devices, as companies attempt to offset rising production costs.
Industry executives have acknowledged the challenge. Xiaomi India chief operating officer Sudhin Mathur said price increases are unavoidable. "A price increase is imminent for us. Most companies have already taken that route. It is not possible to absorb the entire rise in memory prices," he said.
Mathur added that while buyers opting for instalment-based purchases in the entry-level segment may feel limited immediate impact, customers paying upfront could delay purchases. A senior executive at a leading electronics manufacturing services (EMS) firm supplying major brands echoed this concern, noting that memory shortages are likely to persist through the year as capacity has been absorbed by artificial intelligence data centres. New capacity additions will take time, keeping prices elevated and forcing manufacturers to pass on higher costs to consumers, which could weigh on growth.
A senior executive at Lava India also flagged tough conditions ahead, particularly for budget devices. "Phone prices will rise because of the shortage of memory chips, especially in the entry-level segment. We expect 2026 to be a challenging year," the executive said.
Pathak said rising memory and component costs are already reshaping pricing strategies. Instead of across-the-board price hikes, many original equipment manufacturers are expected to adopt shrinkflation-maintaining headline prices while reducing RAM and storage in upgraded entry- and mid-range models. While companies will introduce incremental artificial intelligence features next year, value-conscious buyers may find that meaningful specification upgrades are limited at similar price points, he added.
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