Daybreak - AI is eating your phone's memory and hiking up prices. No, festive sales can't save you either

Episode Date: June 30, 2026

Before every August, Indians who've been nursing a cracked screen or a lagging phone make the same calculation: wait for the festive season. The discounts will come. After all, they always do.This year, they might not.AI data centres are consuming more than 70% of high-end memory chip production. The same chips that go into your phone. Apple has already raised Mac and iPad prices. Budget Android phones in India are up 30 to 40% since January. And the shortage isn't expected to ease until 2027.Tune in.*We want to get to know you a little better. Tell us what you think about Daybreak here.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Just last week, on Thursday morning, Wall Street Journal reported that Apple had hiked up the prices on Macs and iPads by up to $200 or more. Now, while iPhone prices were unchanged at the moment, in a separate statement, the company said that it had now reached a point where it needed to begin racing prices, and that it had never seen a component price increase this much, this quickly. Now, if you're wondering what component Apple is referring to, it's talking about storage and memory. You see, as AI companies around the world have kept buying up memory chips, there has been a shortage of those same storage components for consumer product use. And that shortage is now driving up the cost for what memory is available. And companies are passing on their increased manufacturing costs on to you. And it's not just Apple. Brands like

Xiaomi, Opo, V-O, V-O, One Plus, etc., all brands which are very popular in India for their cheap phones have all seen hikes of at least $1,000 for their budget phones. You know, the ones that sell for $15,000 to $30,000. Now, it's not like price hikes for phones are new. They happen almost every cycle. And because they're so routine, there's a very specific way that the famously price-sensitive Indian consumer likes to go about the way they upgrade. Any Indian phone owner with a cracked screen, a lagging interface or diminishing storage knows the drill that an upgrade should wait till the festive season. Starting from Independence Day on August 15th to Diwali in October and Christmas and New Year at the end of the year,

Indians crowd e-commerce platforms to gift themselves and their loved ones the latest in tech products, appliances and much more. Obviously, the season is just as exciting for the companies. Every retailer and brand is racing to give shoppers the best deals. And of course they would. Considering that the festive period is exactly what contributes to more than a quarter of the $42 billion smartphone market's revenue. But analysts who have been tracking the sector for decades are warning that there's really something different about the price hike cycle this time.

Avril Wu, a senior research vice president at Trent Force, a research company, said in a WSJ report that this was the craziest time ever. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Rachel Wrigues, and every day of the week, my co-host, Nigla Sharma and I will bring you one new story that is worth understanding and not. worth your time. Today is Wednesday the 1st of July. Now, if you're still a little unclear on what the AI boom has got to do with the increasing crisis of smartphones, then here's what's going on. Trend Force, a research firm, reported early this year that both conventional and AI data centers are going to consume more than 70% of the high-end memory chips all manufacturers will produce in 2026.

This is what has triggered this shortage, which IDC, or the International Data Corporation, in a report from late last year, noted was not just any typical shortage that comes along in cycles. Here's what has changed significantly this time around. Three companies that control over 90% of the memory component production, which are Samsung, SK-Hinix and Micron, have systematically been reallocating their,

manufacturing capacity toward HBM or high bandwidth memory chips. These chips are used specifically in AI accelerators. And the reallocation of resources means that consumer-level memory components called DRAM and NAND Flash are now under a very critical supply crunch. By the way, DRAM stands for dynamic access random memory and it's basically the space your phone uses when it's running different apps. The more jam your phone has, the better it handles more tasks without slowing or lacking down. NAND, on the other hand, is your classic storage space.

It's where your photos, videos, apps and files go. That's basically what you're looking at when you're choosing between a 128 GB and 256 GB phone. They're less complex versions of the HBM chips, which, like I said earlier, is what a lot of AI companies need for the data centers. A Bloomberg report mentioned that tech giants are paying very lucrative premiums to the companies that make these chips so that they can guarantee future supply through multi-year contracts. Obviously, the makers of these chips are prioritizing these high-margin orders and not the others. The result is what you're seeing right now. Either through an increase in prices like Tim Cook, Apple's CEO warned what happened when he announced in an interview with WSJ that price, price increases are now unavoidable and unsustainable for Apple to absorb.

Or it reflects in the quality of phones, with manufacturers cutting corners in one aspect to cover up for the other. Take one of Samsung's most recent releases, the A27. It saw a $50 price increase from the model that came before it, the A26. The verge reported that the price hack, though not steep but sizable for a mid-budget phone, seemed unjustifiable, since the phone also came with a drop in camera quality, worse waterproofing and a thicker body. Another thing that's happening is products being scrapped altogether. Nothing, for example, cancelled the release of a few new models in its budget-friendly line late last month. Carl Pei, the CEO of Nothing, even claims that memory is now the most expensive component in a smartphone and that it could account for more than

50% of the total hardware bill. He went on to tell consumers that if they had been waiting to upgrade a device, the best time was well yesterday. The next best time is now. Because pay believes that this year's sales season won't have the discounts people are used to. Stay tuned. In India, specifically, the cheapest phones are taking the biggest hit. Business Standard reported a couple weeks back that smartphone prices have risen 30 to 40% since January in this year alone. IDC, the International Data Corporation, explained in a report from this May that device makers who rely on entry-level models that sell for 15,000 rupees or less are seeing the more stress because they have the third. thinnest margins. This in turn has led to less availability within these models, as brands have started producing less of them. Tarun Pathak, a head researcher at Counterpoint Research, told Forbes

in an interview that the market share for these phones have gone down from 41% in Q3 of calendar year 2025 to 33% in Q1 of calendar year 26, which means the consumers who used to go for these kinds of models are being forced to look at more expensive alternatives. Pathak says that that explains why the market share for phones in the 15 to 30,000 rupees range went up from 35 to 45% in the same period. And that spells trouble for both the consumer and the brand. The IDC report explains how the rising input costs and collapsing margins are causing brands to act on a promotional pullback.

And that's how the festive season gets affected, because brands no longer have the ability to deploy aggressive discounting and channel-led promotions that have historically fueled the mass market growth, which means because brands are less capable of pushing the more expensive phones to the consumers who are now forced into buying them, less of them are being sold. Pathar clarified this further in a business standard report. He said that to drive growth while managing cost pressures, brands are expected to focus more on higher average selling price models where they can balance out the bill of materials cost and profitability at the same time.

Madov Sheth, who is the CEO at AI Plus Smartphone, a new player in the market, said in the same report that despite the increasing input costs, the festive season still remains the most important demand period for both brands and retailers. So, while deep discounts may be less a number, the nature of promotions will change and brands will increasingly rely on exchange programs, bank offers, bundled products, EMI schemes and value-added benefits so that affordability is maintained. The thing is, though, consumer demand is already being delayed. because they aren't exactly jumping at the chance to absorb the cost

and several of them genuinely can't afford to. A joint study done by Tracking Tech, a TV channel and TechArc and analytics firm conducted a survey of almost 6,000 prospective buyers. Their results showed that about 54% of intended demand may not convert into purchases if prices continue to rise beyond expectations. Still, the understanding of the study is that this is mostly a delayed demand and not a complete lack of it. Even though 54% sounds pretty bad at a surface level, when broken down there is actually a bit more hope. 48% of the respondents said that they would wait until prices stabilized, while the remaining 6% indicated that they would shift to second-hand options.

So now that means that the festive season becomes a sort of test for brands. If they do not match the price expectations of consumers, they will either keep delaying their purchase or opt for other channels. And it's already kind of happening. Upasna Joshi, a research manager at IDC India, explained that online markets saw a share fall from 42 to 38% in Q1 of 2026. This was happening because consumers were being forced to invest more in devices. And so, they were heading to physical stores first to experience.

the devices in person. Joshi said that offline did in fact gain ground to 62%. Now, that is a huge number, but it doesn't necessarily signify a permanent shift in channels. Joshi said that if brands can navigate the prices during the festive seasons carefully, then they can still win back customers on online channels. Because while a phone can be tested in person, a good offer can certainly cinch the deal online. Now, how exactly brands are going to navigate this is still unclear though, because IDC and other experts expect the price hike to keep continuing in coming quarters and the memory shortage itself is set to be on till 2027. The IDC report ends with this remark from Joshi.

In a value-conscious market like India, consumers have traditionally delayed purchases in anticipation of festive discounts and promotional offers. However, that pattern is unlikely to hold in the current cycle. With the global memory shortage expected to continue into 2027 and rupee depreciation adding further cost pressure, smartphone prices are set to rise further across segments. Consumers considering an upgrade may find better value in purchasing sonar as pricing pressures are expected to intensify over the coming quarters. Now, waiting for the festive season has always been what. what Indians who want to upgrade their phones have done.

But this time around, as Joshi and Carl Pei say, the best time, in fact, could just be now. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription offers daily long-form feature stories, newsletters and a whole bunch of premium podcasts.

To subscribe, head to the Ken.com. and click on the red subscribe button on the top of the Ken website. Today's episode was hosted and produced by my colleague Rachel Vargis and edited by Rajiv Sien.