Why Are Smartphones Getting Costlier When Fewer Indians Are Buying Them?

Your phone’s battery is tired. The screen has a crack. You have been meaning to replace it.

You open a shopping app with a budget in mind. A few minutes later, you close it. Perhaps the old phone can survive another year. That decision helps explain India’s smartphone slump. According to Counterpoint Research’s preliminary estimates released on October 23, shipments fell 20% year-on-year in July–September 2026. Below ₹20,000, the decline was a much sharper 47%.

Phones are becoming more expensive just as buyers become more reluctant to replace them. Usually, weak demand makes us expect lower prices. Here, the cost of making the product is pushing in the opposite direction.

WHAT EXACTLY HAS FALLEN BY 20%?

The number of smartphones shipped into India’s distribution channels during the quarter, compared with the same period last year.

Shipments and consumer purchases are different measures. A phone supplied to a distributor or retailer may still be waiting for a customer. Counterpoint says manufacturers held back on channel inventory amid soft demand, even ahead of the festive season.

Imagine a shopkeeper who normally orders 100 phones but orders 80 because customers are taking longer to decide. Lower orders reflect caution about future sales as well as what is happening at the counter. A 20% shipment decline does not necessarily mean consumers bought 20% fewer phones.

WHY ARE PRICES RISING IF DEMAND IS WEAK?

Because manufacturers’ costs have risen.

A smartphone contains processors, memory, cameras, a display, a battery and other components. When important parts become substantially more expensive, the brand must decide how much of that increase it can absorb.

Counterpoint identifies record-high memory prices as a central pressure behind India’s latest decline.

Weak demand does not automatically make those components cheaper. A phone brand may want to attract customers with a lower price while facing a supplier asking for more money.

That leaves several options: raise the selling price, reduce specifications, accept a smaller margin or withdraw models that no longer make commercial sense.

None is comfortable when the customer’s budget is fixed.

WHAT IS MEMORY AND WHY HAS AI ENTERED THE STORY?

RAM provides temporary working space for applications while they run. Storage holds photographs, downloaded files and installed applications.

The RAM in a phone typically uses DRAM technology. Its storage generally uses NAND flash. Both are affected by changes in the global memory business.

AI infrastructure creates enormous demand for memory, including specialised high-bandwidth memory and server products. Counterpoint’s separate research says manufacturers’ focus on higher-value memory for AI servers has reduced the priority given to general-purpose memory for low-end phones.

This does not mean a data centre simply takes the exact chip intended for your handset. The connection runs through suppliers’ investment decisions, production capacity and product priorities.

Your next phone can therefore become more expensive because of the AI boom—even if you have no interest in its AI features.

WHY DOES THIS HURT CHEAPER PHONES SO MUCH?

Because there is less room to absorb an increase.

Consider a hypothetical ₹10,000 phone facing ₹1,000 of additional cost. That is equivalent to 10% of its selling price. The same increase is a much smaller proportion of a ₹60,000 device’s price.

Actual component requirements and margins vary, but the arithmetic explains the vulnerability. Customers may be unable to stretch their budgets, while manufacturers struggle to preserve both specifications and profitability.

Counterpoint says the pressure is particularly acute below ₹15,000, weakening the market’s traditional mass-market volume engine. The problem goes beyond making an upgrade less exciting. It can make a necessary replacement harder to afford.

DID ALMOST HALF THE BUYERS BELOW ₹20,000 DISAPPEAR?

We cannot conclude that from the 47% shipment decline. Some devices have moved out of the category because their prices increased. Counterpoint explicitly identifies this movement into higher price bands.

Take a hypothetical model priced at ₹19,000 that rises to ₹21,000. It no longer counts as a sub-₹20,000 phone—even if it remains broadly the same device and someone still buys it.

The category can, therefore, shrink through fewer shipments and products crossing its upper price boundary. The release does not quantify each factor’s contribution.

That distinction matters when reading about “premiumisation”. A greater proportion of expensive phones may reflect customers choosing better devices. It can also reflect higher prices and fewer affordable models.

A more expensive market does not, by itself, establish a richer customer.

CAN BRANDS KEEP THE PRICE AND CHANGE THE PHONE?

Yes. Counterpoint says manufacturers are introducing more 4G and lower-specification models, alongside specification reductions in some segments, to maintain price points.

The price sticker may look familiar while the product underneath changes.

That does not make every cheaper specification a bad choice. Someone who needs calls, messaging and basic applications may value a lower price more than a particular feature.

But comparisons become more demanding. Buyers need to consider performance, storage, software support and expected useful life.

An unchanged price is only one part of the bargain.

IS CHINA FACING THE SAME PROBLEM?

Yes. Manufacturing many of the world’s phones does not protect China’s consumers from rising component costs.

Counterpoint’s October 19 preliminary assessment puts China’s July–September shipment decline at 10% year-on-year, taking volumes to their lowest third-quarter level since 2012.

The pain was uneven. Huawei’s shipments grew 19%, helped by relatively stable pricing earlier in the quarter and demand across its portfolio. Huawei and Apple together accounted for roughly 40% of shipments.

Huawei also raised prices from September, potentially weakening the pricing advantage that had helped it earlier in the quarter. The lesson is that a shrinking market can still produce successful brands. Manufacturers differ in their ability to manage prices, secure supplies and persuade customers.

A strong position in premium phones can provide protection. It does not establish that the wider market is healthy.

WHAT ABOUT THE US?

The affordable end is struggling there too. The US figures here cover April–June 2026, an earlier quarter than the India and China numbers.

Counterpoint found that US smartphone sales fell 5% year-on-year, while sales below $100 dropped 64%. Manufacturers either stopped shipping some inexpensive devices or increased their prices. Sales through prepaid mobile services, where customers pay for connectivity in advance, fell 11%.

Motorola’s price increases also helped expand the $200–$299 segment. Some movement upmarket reflected dearer phones, rather than customers selecting substantially better devices.

The US supplies another useful warning about shipments. Counterpoint recorded 6% shipment growth during the same quarter, partly because manufacturers brought forward supplies ahead of further memory-price increases. More phones entered distribution channels while fewer were sold to consumers. Both numbers can be correct.

HOW DO AMERICAN MOBILE OPERATORS MAKE EXPENSIVE PHONES LOOK AFFORDABLE?

They can offset part of the handset cost for eligible customers.

AT&T, for example, advertises an iPhone 18 Pro offer with up to $1,200 in credits spread over 36 months, subject to conditions including an eligible trade-in.

The advertised device payment can look much smaller than the retail price. Customers still need to examine the service-plan cost, eligibility and conditions for receiving those credits.

These arrangements connect selling a handset with retaining a mobile subscriber, giving operators another reason to support upgrades. But the decline in cheap and prepaid devices shows that such offers do not cushion every buyer.

WON’T FESTIVE DISCOUNTS FIX INDIA’S PROBLEM?

They can help individual purchases. They cannot automatically undo a component-cost squeeze.

In its October 6 outlook, Counterpoint forecast festive-season smartphone volumes would decline around 12%, even as market value increased 5%. It expected financing, trade-ins and targeted offers to play an important role.

Those are forecasts, not completed festive-season results. The research firm defines this year’s festive period as October 8–November 8, after the July–September quarter.

An exchange uses the value of an old handset to reduce the cash required. An instalment plan spreads payment over time. Neither automatically reduces the underlying price. The monthly amount can become manageable while the total purchase remains expensive.

WHAT HAPPENS NEXT?

Across the three markets, premium resilience and mass-market distress can happen simultaneously. Strong flagship sales tell us little about whether someone on a fixed budget can replace a basic handset.

Counterpoint expects India’s smartphone market to shrink by around 13% in 2026. It also anticipates another round of price increases after the festive sales as component costs remain elevated.

These remain projections, and the latest shipment estimates are preliminary. For buyers, the choices are becoming uncomfortable: pay more, accept different specifications or keep using the handset already in their pocket.

For now, the cracked screen has a powerful sales argument. It is already paid for.