AI boom could wipe 230 million budget phones a year from the market

The AI datacenter boom looks set to take a significant chunk of the budget smartphone market with it. A new forecast from Counterpoint Research projects that shipments of sub-$200 devices will fall by around 40 percent between 2025 and 2030, removing more than 230 million units a year from the market by the end of the decade.

Component costs squeeze the low end

Counterpoint attributes the contraction to rising memory and chipset costs, increasingly demanding minimum specifications, and manufacturers' declining willingness to sustain unprofitable entry-level product lines. Component costs consume a greater share of the bill of materials for cheaper devices, leaving less room to absorb increases.

Chipmakers are directing production toward higher-margin components for AI infrastructure, leaving less capacity for the cheaper parts used in consumer devices. Pressure is particularly acute for DRAM and NAND: memory prices have quadrupled over the past year, forcing PC makers to raise prices to record levels amid all-time-low inventories.

A market similar in size, different in value

"The smartphone market will recover in unit terms, but the affordable segment will not return to its previous standing," said Yang Wang, principal analyst at Counterpoint. "The opportunity now shifts toward better-specced mainstream devices and premium products, although higher tiers cannot absorb all the lost volume. The result will be a market that is similar in overall size but materially different in value and competitive profile."

Counterpoint expects the mid-range to become the industry's main battleground by 2030, as manufacturers concentrate launches, marketing and channel investment on better-equipped mass-market devices. With specifications becoming less distinctive, vendors are likely to compete on design, cameras, battery life and durability, while premium devices drive revenue growth. Apple, Samsung and Huawei are expected to be among the beneficiaries: Samsung has a broad portfolio and a history of accepting lower margins to keep market coverage, Apple should remain the largest contributor to premium smartphone market value, and Huawei's flagships and foldables should support its continuing recovery in China.

What it means for buyers

The contraction could make internet access less affordable for lower-income people, particularly in low- and middle-income countries. Buyers may move to more expensive devices, keep their existing phones for longer, or turn to the used and refurbished market.

The squeeze extends beyond phones. Chromebooks and cheap smartphones both rely on low bills of materials, and the AI-driven memory shortage is expected to shrink ChromeOS shipments by 27.6 percent by the end of the year. Omdia put the corresponding declines for Windows PCs and Macs at 12.1 percent and 4.8 percent.