Sub-Rs 20,000 smartphone market may be heading to a 'collapse' and reason is the 'most-loved and hated' technology right now

The cheap smartphone may not disappear, but it could become much harder to find. According to Counterpoint Research, smartphones priced below Rs 20,000 could shrink by around 40% by 2030. That would mean roughly 230 million fewer devices in the segment. The overall smartphone market, however, is expected to recover to its 2025 volume by 2030. So what is changing?Rising memory and chipset costs are putting pressure on the phones that operate on the smallest margins. At the same time, the AI data-centre boom is increasing demand for the same memory components used in smartphones. For buyers, especially in price-sensitive markets such as India, the result could be simple: pay more for a new phone, accept lower specifications or look at the refurbished market.Why are budget phones facing a bigger squeezeThe decline in cheap smartphones is not being caused by one component or one trend. Shubham Singh, Research Analyst at Counterpoint Research, told The Times of India that the sub-Rs 20,000 segment is facing a broader structural shift.“Rising memory, chipset and other component costs are putting greater pressure on entry-level smartphones, where margins are already thin and consumers are highly price sensitive,” Singh said.Budget phones have less room to absorb higher costs because manufacturers are already competing for buyers at very low price points. If component costs rise, brands have fewer options to protect both prices and specifications.They can raise the price. They can offer less memory or storage. Or they can absorb some of the additional cost themselves. None of those options is particularly attractive in a segment where buyers are highly price sensitive.How is the AI boom affecting sub-Rs 20,000 phones This is where the AI data-centre boom enters the picture. AI servers require large amounts of memory and storage, increasing demand for components such as DRAM and NAND. According to Singh, that stronger demand is tightening memory supply and has pushed memory prices up nearly fourfold, with prices expected to approach five times their earlier levels.“The AI data-centre boom is adding to this pressure, particularly through strong demand for DRAM and NAND, tightening memory supply and pushing memory prices up nearly fourfold, with prices expected to approach 5x soon,” Singh said.For smartphone makers, higher memory costs can eventually show up in the products consumers buy. A budget phone could become more expensive while offering similar specifications, or a phone at the same price could come with a lower memory configuration.That pressure is particularly important at the entry level, where even a relatively small increase in costs can make it harder for manufacturers to maintain the same price point.Could this make smartphones harder to afford in IndiaThe impact could extend beyond what phone buyers pay. Affordable smartphones are particularly important for people buying their first internet-connected device. If new budget phones become less accessible, first-time buyers in lower-income markets could have fewer options.Singh said the trend “could make smartphone adoption more challenging for first-time buyers in developing markets.” India could feel this pressure particularly strongly because of its large mass-market smartphone segment.Singh said brands with greater exposure to the sub-Rs 20,000 segment are likely to face the most pressure if the cost of RAM, storage and processors continues to rise.The decline in the sub-$200 smartphone segment reflects a broader structural shift in the market rather than a single factor. Rising memory, chipset and other component costs are putting greater pressure on entry-level smartphones, where margins are already thin and consumers are highly price sensitive. The AI data-centre boom is adding to this pressure, particularly through strong demand for DRAM and NAND, tightening memory supply and pushing memory prices up nearly fourfold, with prices expected to approach 5x soon. This is translating into higher smartphone prices or lower memory configurations, particularly in budget devices. At the same time, premiumization and longer replacement cycles are reducing demand for low-cost smartphones, as consumers either trade up, hold on to existing devices for longer or delay purchases. This could make smartphone adoption more challenging for first-time buyers in developing markets, while creating opportunities for refurbished and pre-owned devices that offer better specifications at lower prices. Globally, the refurbished smartphone market is expected to grow 14% YoY in 2026, while in India, we expect it to grow 16% YoY. Brands with greater exposure to the mass-market sub-INR 20,000 segment are likely to face the most pressure, as they have less room to absorb higher costs without raising prices or compromising specifications. However, financing, promotions, trade-ins and older-generation models can help cushion the affordability impact.That does not mean these phones will suddenly disappear from shops. Brands can still use financing, promotions, trade-ins and older-generation models to cushion the impact of higher component costs.But the equation could become tougher: maintaining the same price may mean making compromises elsewhere.Could refurbished phones become the new budget optionThere is one market that could benefit if new affordable smartphones become harder to buy: refurbished and pre-owned phones. A consumer looking for value may find that an older mid-range or premium smartphone offers better specifications than a new entry-level model at a similar price.Singh said the same shift could create opportunities for refurbished and pre-owned phones, which can offer better specifications at lower prices.Longer replacement cycles could also keep more older smartphones in circulation. Counterpoint expects the global refurbished smartphone market to grow 14% year-on-year in 2026. In India, the research firm expects the market to grow 16% year-on-year.That makes the refurbished market an important part of the smartphone story as new-device costs rise.So, will budget smartphones disappear?No, but the budget smartphone market could look very different by 2030. Counterpoint expects the overall smartphone market to recover to its 2025 volume, but the affordable segment is not expected to return to its previous position.“The smartphone market will recover in unit terms, but the affordable segment will not return to its previous standing,” Singh said.The budget phone isn't disappearing overnight. But if memory and chipset costs keep rising, the next phone that offers the best value may not be a new budget model at all. It could be an older, better-specced phone bought refurbished.That could be one of the unexpected effects of the AI boom: making high-end technology more powerful while making affordable smartphones harder to build.You use AI every day. Now get your AI Quotient. Take the AIQ test.