Omdia Report: Soaring Memory Costs to Trigger 22% Slump in Sub-$400 Smartphone Market

According to the latest research released by Omdia, the global smartphone market is facing a significant shift driven by the sharp and sustained increase in DRAM and NAND prices. This surge in memory costs has become a critical challenge for manufacturers, particularly in the low-to-mid-range sector, and is projected to cause a year-on-year decline of over 22% in the sub-$400 smartphone market.

The impact on production costs is substantial. For smartphones priced under $400, the proportion of memory cost in the total Bill of Materials (BOM) nearly doubled in the first quarter of 2026. Similarly, for models priced above $400, this proportion has also increased by more than 100%. This trend is severely squeezing the profitability of budget-friendly devices, forcing manufacturers to reconsider their market strategies.

For the highly price-sensitive consumers in the low-end market, any increase in product price is likely to lead to a significant drop in demand. With memory prices expected to continue their upward trend in the coming quarters, many smartphone manufacturers have already begun to proactively and gradually scale back their presence in the low-end segment to mitigate risks of declining demand and shrinking margins.

Omdia's latest forecast from May predicts a 12% year-on-year decrease in total global smartphone shipments for 2026, largely driven by the sharp downturn in the sub-$400 segment. Specifically, shipments for models in this price range are expected to fall by more than 22% year-on-year.

In stark contrast, the premium smartphone market (above $400) is demonstrating strong resilience, with shipments projected to grow by 5.7% in 2026. This growth is propelled by several factors: manufacturers are accelerating their transition towards mid-to-high-end models, rising retail prices are pushing more devices into the over-$400 category, and high-end consumers exhibit lower price sensitivity.

To counteract the rising memory costs, manufacturers of premium smartphones, especially those above $600, are adopting clever cost-optimization strategies for other key components. Since components like the SoC, display, and camera modules account for a larger share of the BOM in high-end devices, there is more room for adjustment. Key strategies include:

• Display Panels: Some Chinese smartphone manufacturers are reverting to LTPS OLED panels from the more advanced LTPO OLED in certain high-end models, reserving LTPO technology for flagship products only. This move can save approximately $3 to $5 per device.
• Camera Modules: Manufacturers are employing more flexible imaging configurations based on product positioning, such as using smaller image sensors or reducing the number of cameras to lower overall costs.
• System-on-Chip (SoC): In smartphones priced above $600, where the SoC is the most expensive component, companies are extending the lifecycle of previous-generation platforms. Slowing down the chip upgrade cycle can reduce costs by 30% to 40% compared to using the latest platform.

In conclusion, the escalating cost of memory is fundamentally reshaping the global smartphone landscape. It is creating a clear polarization in the market, forcing a strategic retreat from the budget segment while simultaneously driving innovative cost-management solutions in the resilient and growing premium sector. This trend is likely to continue as long as memory prices remain on their upward trajectory.