China’s Budget Phones Are Vanishing — and Memory Chips Are Why

Rising memory chip prices are forcing Chinese smartphone makers to shrink their budget lineups, with some low-end models shelved entirely before they even reach store shelves.

What happened

Chinese smartphone manufacturers — excluding Huawei — shipped 19% fewer handsets in Q2 2026 compared with the same quarter a year earlier, according to market research firm Omdia. The collapse is sharpest at the low end: shipments of sub-$100 smartphones fell 54% year-on-year in the first half of 2026, while the $100–$200 tier dropped 17% over the same period. Industry insiders say the culprit is chipflation (the rapid, sustained rise in memory semiconductor prices that squeezes device makers’ margins). One domestic Korean component supplier told ET News: “Some budget smartphone models where memory semiconductor costs exceed 50% of manufacturing cost are not being launched at all.”

Why Korea does it this way

Korea is at the center of this story because SK hynix and Samsung Electronics together supply the majority of the world’s DRAM and NAND flash memory — the chips inside every smartphone. When memory prices spike, the pain travels instantly down the supply chain to any device maker that lacks the purchasing scale to lock in long-term contracts at stable prices. Chinese brands such as Xiaomi, OPPO, and Vivo have considerably weaker negotiating power than Apple or Samsung, making them price-takers in tight supply conditions. Korean component makers that supply the Chinese handset industry are already reporting order volume being pushed back or cut outright.

What it means for you

Investors in Korean memory names: Tighter demand from Chinese OEMs (original equipment manufacturers) could cap the near-term upside for commodity DRAM and NAND, even as HBM (high-bandwidth memory, the stacked chips used next to AI accelerators) demand remains robust. Check the current memory spot and contract price at DRAMeXchange before drawing conclusions about earnings. Samsung Electronics and SK hynix are both components of the KOSPI 200 index.

Korean component suppliers: Firms that make display panels, camera modules, or other parts for Chinese handset brands are already seeing orders reduced. This is reported, not hypothetical — but the scale of the impact on individual suppliers has not yet been disclosed.

Consumers buying mid-range phones: Fewer cheap Chinese handsets reaching the market means less price competition in the sub-$200 tier globally. If you were planning to replace an aging budget phone, expect thinner choice and less discounting than in prior years.

Samsung’s own lineup: ET News separately reports that Samsung is quietly downgrading non-memory components — such as display specifications — on its mid-range and budget Galaxy models to offset higher memory costs. The scale of the specification changes has not been publicly confirmed by Samsung.

FAQ

Why are Chinese smartphone shipments falling in 2026?

Chinese smartphone makers (excluding Huawei) shipped 19% fewer devices in Q2 2026 year-on-year because surging memory chip prices make budget models unprofitable — sub-$100 phones fell 54% in H1 2026 as manufacturers cut or cancelled low-margin launches rather than sell at a loss.

What is chipflation and how does it affect phone prices?

Chipflation refers to the rapid rise in memory semiconductor prices; for budget smartphones where memory can account for more than 50% of manufacturing cost, even a moderate price increase wipes out thin margins, forcing makers to either raise retail prices (triggering consumer resistance) or simply stop making those models.

Watch next

• Omdia Q3 2026 smartphone shipment data — Omdia typically publishes quarterly shipment figures 6–8 weeks after quarter-end; a Q3 print (expected late November 2026) will show whether the budget-tier decline accelerated or stabilised after two full quarters of chipflation pressure.
• Samsung Electronics Q3 2026 earnings call — Samsung is scheduled to hold its Q3 earnings briefing in late October 2026; listen for guidance on memory contract price trends and any commentary on mid-range Galaxy specification adjustments.
• Memory spot prices at DRAMeXchange — If DRAM spot prices retreat below the level that makes sub-$100 phones viable again (check the current figure at DRAMeXchange), expect Chinese brands to reactivate shelved budget models within one to two quarters.

Source: ET News (전자신문)