2026 Crisis Spreads Widely, Cheap Smartphones Threatened with Extinction

Jakarta, CNBC Indonesia - The era of affordable smartphones that have driven internet access for the masses is predicted to end. Global smartphone shipments are forecast to drop 13% in 2026, the largest annual decline on record. The sharpest declines are projected in Africa and the Middle East, with shipments plummeting over 20% in both regions. Not economic weakness or market saturation, but the surge in AI industry demand for memory chips is straining global smartphone supply. An International Data Corporation (IDC) report states AI’s demand for DRAM has surged sharply for both model training and AI service operations in data centres. Consequently, memory supplies previously used for smartphones and laptops are now being redirected to data centres to support large language models (LLMs). ‘This shock is not temporary but a structural shift across the entire market,’ IDC stated in its report, cited from BreakChange on Monday, 25 May 2026. In business terms, chip manufacturers find it more profitable to sell memory to AI companies, as the AI sector is willing to pay higher prices compared to smartphone makers dependent on price-sensitive markets. Meanwhile, DRAM production capacity is difficult to scale up quickly. Building a state-of-the-art DRAM plant requires $15 billion to $20 billion in investment, not including equipment costs. The high capital requirements and industry risks deter many tech firms from entering this market. The memory industry’s history shows fierce competition. Intel exited DRAM in the 1980s, followed by Texas Instruments and IBM in subsequent decades. Germany’s Qimonda collapsed in 2009, while Japan’s Elpida went bankrupt in 2012. Beyond investment constraints, DRAM development faces technical challenges. The technology is harder to advance than other chips due to physical limits of power storage components. This situation is expected to directly impact the cheap smartphone market, particularly in developing nations which have been key drivers of new internet users. For app developers, the shift forces strategic adjustments. The budget smartphone segment, previously a focus for mobile-first strategies, is projected to shrink further. As long as the AI industry can pay more for memory chips, DRAM prices are expected to remain high. This means the era of affordable smartphones that enabled digital access for billions worldwide may become increasingly inaccessible.