Memory shortage deepens pressure on smartphone market

CNBC Africa · Lunch West Africa — Watch on CNBC Africa

Overview

Shilpi Jain, Senior Research Analyst at Counterpoint Research, joined the David Alab on the Power Lunch West Africa program to explain how the ongoing memory crisis, driven by surging AI infrastructure demand, is putting the smartphone market under growing pressure. Higher component costs and tighter supply are forcing brands to rethink pricing, specifications and financing, while consumers, especially in emerging markets such as West Africa, are delaying upgrades or turning to refurbished devices. 

Shilpi notes that brands with greater exposure to entry-level and affordable segments are the hardest hit. She expects the challenges to persist through the coming quarters and 2027, with a stronger shipment recovery from 2028. 

Outline 

What is driving the current downturn

• The main factor is the ongoing memory crisis, with AI infrastructure absorbing a growing share of memory supply and demand. 
• Smartphone makers face higher component costs and tighter supply. Prices have been rising for about a year.
• Anticipating higher memory prices, brands front-loaded shipments in the earlier quarters of the year, which now adds to the downturn. 

How smartphone brands are responding

• Manufacturers are weighing pricing strategies, portfolio optimization and alternative financing schemes to keep devices affordable.
• In emerging markets, brands are trimming specifications, camera configurations and storage options, and some are considering 4G chipsets to cut costs.
• In higher price tiers, brands are leaning on financing schemes, trade-ins, installment plans and promotional offers to reduce the upfront cost for consumers. 

Who is most exposed: Apple and Samsung vs. Chinese brands 

• Brands with higher exposure to entry-level and affordable segments face greater challenges.
• Apple and Samsung are relatively better positioned. Apple's premium positioning leaves it somewhat insulated, and its shipments have not been hit as hard. 
• Brands such as Oppo, realme and Transsion are more exposed because of their heavy reliance on entry-tier segments, and their shipments are being hit harder. 

Consumer behavior in emerging markets 

• Consumers are delaying upgrades, shifting to the secondhand market, or waiting for promotional periods and major sales events before buying with financing or installment plans.
• Rising component costs are also making feature phones more expensive, making it harder for first-time users to move up to smartphones. 
• The risk goes beyond weaker sales to reduced access to smartphones, which could delay the digital inclusion goals governments in emerging markets are pursuing. 

Frequently asked questions 

What is behind the current smartphone market downturn? 

The ongoing memory crisis, driven by AI infrastructure demand, is raising component costs and tightening supply for smartphone makers. Prices have been climbing for about a year, and brands that front-loaded shipments earlier in the year in anticipation of higher memory prices are now feeling the effect. 

Which smartphone brands are most affected by the memory shortage? 

Brands with greater exposure to entry-level and affordable segments, such as Oppo, and realme , are the most affected. Apple and Samsung are better positioned thanks to their premium focus, though they too are now adjusting pricing and cutting production orders. 

How are smartphone makers responding to higher memory costs? 

They are reviewing pricing and portfolio strategies, trimming specifications, cameras and storage in affordable models, and expanding financing schemes, trade-ins, installment plans and promotions in higher tiers. 

How is the memory shortage changing consumer behavior in emerging markets? 

Consumers are delaying upgrades, buying refurbished or secondhand devices, and timing purchases around sales events and financing offers. These habits could outlast the crisis and may delay digital inclusion in markets such as West Africa.