AI Data Centre requirements for the storage of chips are being channelled upstream to the consumer electronic market. India, the second largest global market for smartphones, has become the most visible observation of this round: mobile phone prices have risen, low-cost machine pressure has fallen, and overall output has dropped markedly.

In India, data from Centerpoint Research shows that smartphone deliveries declined by 10 per cent in April to June, the worst in almost six years. This compares with a 2 per cent decline in the Chinese market during the same period, indicating that India has been hit harder.

AI demand crowding in mobile phone storage supply

This wheel of pressure comes mainly from RAM and storage chips. Samsung electronics, SK Hercules and Light are shifting more energy to high bandwidth storage HBM. HBM is an important part of the AI accelerator, and the profit of a single crystal circle is also higher than the standard storage chips commonly used in mobile phones and PCs.

With the transfer of production capacity, the supply of conventional storage chips used by mobile phones has tightened, resulting in higher costs. For price-sensitive markets, such changes can be channelled more quickly to end-sale prices.

India's low-cost machine is the most exposed.

According to the Vice-President of Counterpoint Research, Tarun Pathak, about 60 per cent of India's smart phone market is concentrated below Rs. 20,000. This zone is the most sensitive to the increase in the price of spare parts and is therefore the most affected.

He stated that consumers would not give up buying smart phones, but would delay the switch. The original replacement cycle of about 3.5 years may extend to about 4 years. At the same time, high-end brands such as Apple and Samsung were relatively less affected by the low sensitivity of high-priced machine users to price increases and by the reduction of purchase pressure by instalments.

By market breakdown, deliveries of less than Rs.15 million decreased by 45 per cent, the largest drop. The combined market share of China ' s brands has also fallen to its lowest level since the second quarter of 2020 as a result of the deeper distribution of its brands in the entry and middle markets.

The brand strategy began to adjust.

Market pressures have affected the strategy of manufacturers. Samsung is the only company in India that has achieved export growth in the second quarter of the year, an increase of 2 per cent. The delivery of apples declined by 3 per cent, but was mainly due to supply and stock restrictions affecting iPhone delivery.

OnePlus this week indicated that, following a careful assessment, the introduction of new products in Europe and North America would be discontinued but that the Indian market would continue to operate. According to data provided by Counterpoint to TechCrunch, in the first quarter of this year, the Chinese market accounted for 74 per cent of the world's exports from OnePlus, up from 59 per cent in the same period the previous year; India's share fell from 30 per cent to 19 per cent.

This means that, after the profit space has narrowed, some brands are shrinking to a more profitable market. Similar adjustments may occur in the future among a larger number of medium- and low-end manufacturers.

Raised or continued after 2027

IDC Research Director Kiranjeet Kaur said that the Indian smartphone market was moving from a “sold” to a “sale-driven” market. In other words, the number of mobile phones sold has decreased, but the income from single machines has increased. Behind this is the continued increase in the cost of spare parts, making it increasingly difficult for low-cost mobile phones to sustain profits.

According to Pathak, mobile phone prices in India have risen by 4 to 68 per cent depending on the type of machine. Following price increases, consumer choices fall into three main categories: moving to higher-price models, dilating machines, or entering secondary markets.

IDC predicts that India will also experience a double-digit decline in the delivery of smartphones in the second quarter, down from 4.1 per cent in the first quarter and 5.3 per cent in the previous quarter. Kaur also indicated that storage shortages and high cell phone prices could continue at least until the end of 2027, although the rate of increase is expected to slow down.

In addition, the weakness of the rupees is increasing the pressure. After rising import costs, brands and channelers ' profit margins were further narrowed, and eventually some costs were passed on to consumers.