TLDR;
The video discusses why smartphones are getting more expensive in India. It's not just about RAM prices increasing due to AI demand, but also the collapse of the budget phone segment, the hardware costs associated with AI features, rising global manufacturing costs, and brands pushing for premiumization. The budget segment is shrinking, forcing consumers to buy more expensive phones, and brands are taking advantage of EMI options to make higher prices seem more manageable.
- Budget smartphones are becoming unsustainable for brands.
- RAM and storage prices are increasing due to AI.
- AI features in phones add to the hardware cost.
- Global manufacturing costs are rising.
- Brands are pushing for premiumization, making phones more expensive.
Introduction: Phones are Getting Expensive [0:00]
The video starts by acknowledging the common knowledge that phone prices are increasing due to the rising cost of RAM and storage, largely driven by the AI industry buying up available memory. However, the video aims to explore other, less discussed reasons behind this trend. India has traditionally been a budget-first smartphone market, but this pattern is changing.
The Decline of the Budget Segment [0:21]
While the Indian smartphone market is growing overall, this growth isn't coming from the budget segment. Entry-level and lower mid-range phones haven't recovered their market share. Phones under ₹10,000 have seen a decline, and the ₹10,000 to ₹20,000 price band is also experiencing a noticeable decrease in shipments compared to last year. The growth is being driven by upper mid-range and premium smartphones because budget smartphones are no longer sustainable for brands due to thin margins. Some China-based ODMs that used to manufacture budget 5G phones for India have reduced their low-end production.
RAM Price Hike Impact [2:30]
Processors used to be the most expensive part of a phone, but now memory is catching up. For example, RAM in the Galaxy S26 could cost double what it did in the S25. This increase impacts brands differently based on their average selling price. For iPhones, memory makes up a small percentage of the cost, so Apple can absorb some of the increase. However, mid-range brands like Xiaomi and budget brands like Redmi are hit harder because memory makes up a larger percentage of the phone's cost and their margins are thinner. Samsung, SK Hynix, and Micron, the world's largest RAM manufacturers, have tightened supply, diverting RAM to AI servers, which are willing to pay more. This isn't a short-term issue, as Micron is focusing on AI data center memory, reducing the supply for smartphones and PCs.
AI Smartphone Hardware Tax [5:45]
The rise of generative AI smartphones is also contributing to higher prices. These phones require more RAM, more storage, and a dedicated NPU to handle on-device processing. IDC estimates that this segment will grow by 73% in 2025, and Counterpoint predicts that one-third of all smartphone shipments will be AI-capable. Even if you don't use the AI features, the expensive hardware is still included in the phone and adds to the final cost.
Global Manufacturing Costs and Brand Perspective [6:57]
Foundries that make silicon chips have increased their wafer prices by 5-10% due to rising energy bills, equipment costs, and labor costs. This affects all brands, as they all buy components from the same global ecosystem. Brands are also taking advantage of EMI options to make higher prices seem more manageable. The era of cheap flagships is over, and premium is the new normal. Mid-range phones are already seeing quiet price revisions, with brands like Vivo, Realme, IQOO, and Oppo increasing prices by ₹1,000 to ₹3,000 without major upgrades. This is happening in the US as well, with carriers pushing users towards higher-end phones and plans.
Conclusion: Multiple Factors at Play [8:57]
The increase in phone prices is due to a combination of factors: the collapse of budget phones, RAM and storage price increases, the hardware tax for AI, rising global manufacturing costs, and brands pushing for premiumization. The speaker advises viewers to use their phones for as long as possible and make smart decisions about when to upgrade.
