The cheapest cell phones, in danger: the unexpected crisis that unleashed the boom of artificial intelligence

The cell phone industry is going through one of its most complex periods in recent years. During the third quarter of 2026, global shipments plummeted by 20%, amid a crisis marked by the rising cost of memories and difficulties in obtaining components. The drop reflects a strong decrease in the number of devices that manufacturers distribute for sale in the different markets around the world. This data comes from preliminary estimates by market analyst Counterpoint Research, published by the international news agency Reuters, and represents the lowest shipment level for a third quarter since 2012. One of the factors behind the decline is the scarcity and rising prices of memories, pressured by the demand for components for artificial intelligence infrastructure. The construction of data centers and the growing demand for memory for servers are changing the production priorities of semiconductor manufacturers. As a result, smartphone manufacturers face higher costs and difficulties in maintaining their prices. Why artificial intelligence is making cell phones more expensive The fervor and speed that OpenAI, Google, and Anthropic are imposing on the development of their large language models (LLMs) imply an enormous amount of processing and memory capacity to function at a large scale. Data centers use different types of chips, including specialized memories that allow working with advanced models. Although not all those components are the same as those used in phones, they compete for industrial resources, manufacturing capacity, and investments within the supply chain. The scarcity and price increases affect DRAM and NAND memories. DRAM functions as temporary working memory: it stores the data that the processor needs while executing applications. NAND, on the other hand, stores information permanently, such as photos, documents, videos, and the operating system. TrendForce estimated that the average contractual price of LPDDR5X memories for smartphones would increase by between 78% and 83% in the second quarter of 2026, compared to the previous quarter. Interviewed by Clarín, various local sources from Motorola and Samsung agree that the main affected are the popular entry-level models, because it is where the cost of components represents a higher proportion of the total value of the device and where margins are most limited. Others, however, are more forceful: "Current prices are not profitable. Their correction will cause the low or entry-level range to disappear directly." Apple also reflected the increase in costs in the prices of its new line. In the last event, it presented the iPhone 18 Pro and Pro Max with initial prices US$100 higher than their predecessors and announced its first foldable model, the iPhone Duo. A paradigm shift. But companies have different alternatives to combat this situation beyond increasing prices. For example, they can reduce their margins, modify components, or decrease manufacturing volumes. According to the report data, many still prioritize profitability over the growth of units sold. "What is changing is the way we define our portfolio. In a context of higher costs, we have to be more and more efficient and analyze which configurations offer the best balance between performance, experience, and price," highlighted Martín Novoa, commercial director and head of Motorola Argentina. And he added: "Portfolio optimization does not mean abandoning a segment, but adapting the offer to the new market conditions." A sign of the crisis facing the sector is also in the reorganization of key players in the sector, such as the processor manufacturer Qualcomm, which recently announced a global reduction in personnel. The company that designs the "brain" of cell phones will carry out this restructuring starting in November, according to an internal memo from its CEO, the Brazilian Cristiano Amon. Apparently, Qualcomm is not escaping the trend: it faces lower cell phone sales and a growing dependence on businesses linked to artificial intelligence and data centers. The most affected brands But for some Chinese manufacturers, the outlook is less favorable. According to Counterpoint estimates, Xiaomi registered a drop in shipments of over 30%, and its market share was around 10% of the global market. Faced with this scenario, the company opted to reduce its presence in certain low-end price segments and international markets, with the aim of protecting its profitability. The situation also affected OPPO and vivo, which registered setbacks of over 20%. These results reflect the difficulties manufacturers face in sustaining large sales volumes in a context of rising component costs and consumers postponing the renewal of their cell phones. The explanation, according to industry sources consulted in Argentina, is largely related to the commercial strategy of these brands, which usually concentrate most of their offer on entry-level cell phones and differentiate their models mainly by memory and storage capacity. Users change cell phones less often On the other hand, the Counterpoint report also reflects a change in user habits that goes beyond the problems manufacturers must face. The increase in prices and gradual improvements between generations make many find insufficient reasons to change devices every year. At the same time, refurbished phones appear as an alternative for those looking to save money. This trend represents a greater challenge for manufacturers, who need to convince their buyers that the new generations of devices bring functions that justify the investment. And in that search, artificial intelligence tools play a key role in their commercial strategy. For example, Motorola promotes Qira, Samsung has Galaxy AI, Apple recently renewed Siri AI, and Google made Gemini massive. However, the same technology that companies use to promote their products is also contributing to making some of their components more expensive. What could happen with prices in Argentina Although the report analyzes the global market, the situation is also relevant for Argentine consumers. The last price increase for cell phones happened in June, when the values escalated by 30% and left low-end models in a very complicated situation. "In $100 cell phones, memory represented between 30% and 40% of the total cost before. Now, it has become more important than the final consumer value: each chip costs between $130 and $170, more than the phone itself," acknowledged a spokesperson from one of the leading brands in Argentina. Furthermore, the phones sold in the country depend on international supply chains, imported components, and specific commercial conditions. That is why a sustained increase in manufacturing costs could be passed on to the price in certain models.