Smartphones under $400 are about to get squeezed where it hurts: on the memory line item. Omdia predicts a 22% year-over-year decline in sub-$400 phone shipments this year, as surging RAM prices make low-end economics wobble. In plain English, when RAM gets expensive, the cheapest phones do not have enough margin flexibility to absorb it.

Omdia goes further, warning that the trend is already pushing low-end products toward unprofitability and raising the risk of weakening demand as retail prices keep climbing. The report’s logic is brutal and simple: memory costs are no longer a manageable input for budget models, and the market segment that depends most on affordability is the segment most likely to lose volume.

Why are memory prices spiking right now? The source points to the AI boom, which relies heavily on the same broader memory supply chain that serves consumer electronics. Much of the demand surge is tied to AI data center construction, and those buyers need DRAM (RAM) and NAND (storage). When more money chases the same chips, the supply-demand balance tilts, and chip costs rise across the electronics ecosystem. That ripple effect then shows up in bill of materials for everything from phones to laptops.

The math for budget phones is what turns the squeeze into a strategic threat. Omdia says memory and storage costs have spiked, and specifically notes that memory costs now account for nearly 60% of the total bill of materials to make a smartphone in the sub-$400 price tier. For phones priced below $99, memory takes up more than 64% of the BOM, according to the research firm. That concentration matters because it limits options. If memory is half (or more) of your cost structure, even small pricing increases can trigger a demand problem, and even cost cuts elsewhere may not move the needle enough to protect margins.

This also explains why premium phone makers have more flexibility, at least in theory. Omdia says a premium phone maker can trim building costs by using an older processor, a cheaper display, or a different camera setup. A budget phone maker, by contrast, already runs on thinner margins and has much less “fat” to cut. You can sometimes downgrade components in a high-end product without killing brand value, but with low-end devices, the customer is buying a price point first. If the bill rises faster than the retailer can sell, the whole segment feels it.

Omdia also points to the pressure on consumer tech brands, including popular Chinese brands like OPPO and Xiaomi. As RAM shortages persist, global brands are under pressure to raise retail prices to preserve margins. But raising retail prices is risky in the sub-$400 market, because demand tends to be more price-sensitive. In other words, the brands face a classic dilemma: protect margins and risk sales volume, or hold prices and risk profit erosion.

The impact is not confined to phones. The source lays out a broader pattern of consumer electronics price pressure. Apple recently raised prices on many Macs and iPads by as much as $300 after Tim Cook warned that the memory shortage had become too expensive for the company to continue absorbing. Apple has yet to raise iPhone prices this year, though the starting price for new iPhone models could increase when models are unveiled in the fall. Microsoft is raising Xbox console prices by $100 to $150 beginning August 1, saying memory and storage costs had risen by more than 2.5 times and could climb again. Valve also raised alarms for gamers, revealing a $1,049 starting price for its Steam Machine, while Dell and Lenovo hiked prices between 15% and 20% in December and January. Retailers are warning more increases are coming too. Alex Baldock, CEO of Currys, Britain’s largest electronics retailer, said shoppers should expect higher prices on smartphones and laptops later this year.

Set that against Omdia’s wider smartphone forecast: the research firm expects the global smartphone market to decline by 12% this year, largely driven by the 22% year-over-year drop in sub-$400 shipments. Shipments of phones priced above $400 are expected to grow by 5.7%. That split matters for investors, boards, and anyone building go-to-market plans. If memory scarcity amplifies the gap between affordability tiers, then product strategy is no longer just about specs or differentiation. It becomes a supply chain and pricing survivability problem.

For executives, the strategic stake is clear: budget portfolios are at higher risk of demand weakening as retail price rises, while premium segments may capture relative growth. In a market where memory costs can dominate your BOM, the companies that plan earliest for pricing, component sourcing, and mix shifts are the ones most likely to avoid getting boxed in by a shortage they did not create.