The $100 Phone Is Going Extinct: AI Data Centers Are Eating the World's Memory Chips

The cheapest smartphones on Earth are disappearing, and the reason is sitting in a server rack in Virginia. A reporting deep-dive published by Rest of World on October 5, 2026, documents a collapse that has been building all year: global shipments of sub-$100 smartphones fell almost 60% year over year in the second quarter of 2026, according to IDC data, because the memory chips that go into budget handsets are being bought up — at any price — by AI data centers.

The mechanics are brutally simple. Every AI cluster needs staggering quantities of DRAM and HBM alongside its GPUs. In late 2025, the three companies that control more than 90% of the global memory market — Samsung Electronics, SK Hynix, and Micron Technology — pivoted the vast majority of their wafer supply toward AI data centers and away from consumer electronics. “There are three primary manufacturers of memory, and in late 2025, all of them pivoted the vast majority of their supply towards AI centers instead of consumer electronics,” IDC research director Ramon Llamas told Rest of World. “That left many companies scrambling for inventory. … Scarcity of memory has driven up prices for memory, and those price increases have been passed on to the consumer.”

The numbers behind the collapse

The price signal has hit every tier of the market, but it lands hardest at the bottom, where a phone’s bill of materials leaves no room to absorb a memory shock:

• Existing phone prices are up about 15% globally this year; newly launched models are roughly 25% more expensive than last year’s equivalents.
• The increases are sharply regional: 21% in India, 19% across Asia-Pacific, 18% in the Middle East and Africa — versus just 5% in the U.S. The regions least able to pay are paying the most.
• In India, Xiaomi raised the price of a 128GB Redmi 15C from 12,499 rupees ($140) at launch last December to 16,999 rupees ($190) by June — a 36% increase on the same device.
• In Southeast Asia, Oppo’s sub-$100 shipments plunged 96%, and vivo moved its main entry-level model above $100 in most markets, per Omdia.
• In Africa, where 81% of smartphones shipped last year cost less than $200, sub-$100 shipments fell 34% year over year in Q2 2026.
• Last year, 173 million sub-$100 smartphones shipped worldwide, and more than one in four smartphones globally cost under $150. That entire segment is now in retreat.

The memory side of the story explains the violence of these moves. The DRAM price surge of 2026 has been extraordinary by any historical standard — server DRAM contract prices were reported up as much as 70% in a single quarter, mobile DRAM quotes were pushed up more than 80% versus Q1, and Samsung followed Q1 increases of roughly 90% with another 50–60% in Q2, then went back to customers for a further 20% in Q3. When the memory content of a budget phone inflates by that much, there is no margin left to defend. The phone either gets dramatically more expensive or it stops existing.

Why Chinese makers walked away from cheap phones

Chinese manufacturers — Xiaomi, Oppo, vivo, Huawei — built their global dominance on affordable, feature-rich devices, and together account for roughly 60% of all smartphones shipped globally. Counterpoint senior analyst Ivan Lam told Rest of World that these companies have “drastically reduced” their entry-level projects this year and are instead prioritizing more profitable premium devices, branding, user experience, and on-device AI. “What used to be below $150 may become below $250, or even $300,” Lam said — and he does not expect costs to return to pre-2025 levels.

That is a structural admission, not a cyclical one. The budget phone was never a high-margin product; it was a volume and ecosystem play. If memory costs make the bottom tier unprofitable, the rational move is to abandon it — which is exactly what the shipment data shows happening.

The digital divide gets an AI surcharge

The first casualty is not the bargain hunter — it’s the person who has yet to buy their first smartphone. GSMA, the global mobile industry association, had projected nearly 800 million more people would come online via mobile internet by 2030. Claire Sibthorpe, head of digital inclusion at GSMA’s foundation, told Rest of World the group is now worried that rising handset costs will undermine that projection.

The economics are stark: an entry-level device costs the poorest 20% of consumers the equivalent of 44% of their monthly income, rising to 76% for people in sub-Saharan Africa. “We live in an increasingly digital world, and the proliferation of technologies such as AI is creating greater digital divides and inequities,” Sibthorpe said. “Stakeholders are increasingly using AI to provide access to important services, but people won’t be able to benefit without access to an internet-enabled phone and the internet.”

Her description of coping behavior reads like a policy warning: people delay upgrades, borrow or share devices, remain on older feature phones, or drop offline entirely when a device is lost or stolen. “Often, it means they won’t have an internet-enabled device at all.”

The trillion-dollar tug-of-war

The budget phone is losing a bidding war against infrastructure spending of a different magnitude. S&P Global estimates that capital expenditure by U.S. hyperscalers — Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX — will exceed $1.3 trillion in 2027, up from a projected $870 billion in 2026 and $470 billion in 2025. Against that demand curve, the memory contents of a $90 handset are rounding error. Memory makers are not being sinister; they are following revenue. But the aggregate effect is that the world’s poorest consumers are now effectively competing for silicon against the AI buildout — and losing.

There is a bitter irony worth naming: the same AI industry that promises to extend services to the developing world is, through its supply chain, pricing the entry ticket to the internet out of reach. As more essential services — payments, government ID, health information, education — move online and assume a smartphone, the cost of exclusion compounds.

What to watch

Three indicators will tell us whether this is a trough or a new floor. First, memory pricing: if Samsung, SK Hynix, and Micron bring meaningful new capacity online for LPDDR in 2027, budget phones could stage a partial comeback. Second, Chinese vendor behavior: whether entry-level lineups reappear once memory costs stabilize, or whether the sub-$150 tier is permanently redefined upward to $250–300, as Counterpoint expects. Third, substitution: refurbished phones, stripped-down “lite” models with minimal memory, and feature-phone persistence in sub-Saharan Africa and South Asia will measure how the bottom of the market adapts.

None of the analysts quoted expects relief soon. Llamas says the shortage is “unlikely to ease soon”; Lam doesn’t see pre-2025 costs returning. For now, the defining image of the AI boom’s collateral damage isn’t a data center at all — it’s an empty shelf where the $100 phone used to be.