The $100 Phone Is Dying. AI Data Centers Ate Its Memory. | Edition 342
Edition 342 — Memory chip prices have tripled as AI buys them up. Here’s what that means for your next phone and laptop.
The cheapest phones in America are vanishing, and AI is the reason.
In the US, sales of phones under $100 fell 64% from a year earlier in the spring, according to Counterpoint Research. Worldwide, IDC now expects 2026 to be the worst year for phone sales it has ever recorded: down about 17%. The average phone now sells for about $581, up roughly 28% in a single year.
IDC’s lead phone analyst, Francisco Jeronimo, summed it up in one line: “the era of the cheap smartphone has ended.”
Why AI is doing this
Every phone and laptop needs memory chips. So does every AI data center, and the data centers need far more, plus a special high-end kind called HBM (high-bandwidth memory) that sits right next to the AI chips. There are only three big memory makers in the world, and they can only build so many chips. AI companies pay more, and they sign bigger, longer contracts.
So the factories shifted. HBM went from about 2% of memory production in 2023 to a projected 20% by the end of this year. Micron, one of those three makers, shut down its consumer brand, Crucial, last December to focus on AI customers.
The result, per IDC: memory chip costs for phones and computers are up more than 300% from a year ago.
Why cheap phones get hit hardest
In a $1,200 iPhone, memory is a slice of the cost. In a $99 phone, Counterpoint says memory now makes up more than half of what goes into it. There is no room left to absorb a tripled price, so those phones either disappear or move up a price tier. Motorola’s popular budget G-series now sells mostly in the $200 to $299 range, and some smaller brands have pulled out of the US entirely.
Laptops are on the same path. Dell raised laptop prices 15 to 20% last December, and Gartner has warned that PCs under $500 could disappear by 2028.
One wrinkle: higher prices don’t mean the industry is shrinking in dollars. IDC expects fewer phones sold but more money spent overall, because each phone costs more. The people squeezed out are the ones who could only afford the bottom of the market.
What it means for you
Don’t wait for prices to drop. IDC expects the memory squeeze to last until at least 2028. If you need a phone or laptop now, waiting a year probably means paying more, not less.
Make what you have last. A new battery and a case cost a lot less than a new phone this year.
Look at refurbished. Last year’s flagship, refurbished, often beats this year’s budget model on both price and memory.
Check the memory, not just the price. Some new phones are shipping with less memory than last year’s model at a higher price. Compare the specs before you buy.
For two years, AI’s cost has been a story about billions of dollars and power plants. This is where it reaches your wallet directly. The companies building AI can outbid you for the same chips, and right now they are.