The cheapest phones are disappearing, and AI data centres are the reason

A phone needs memory chips to hold its software, your photos and your apps. AI data centres need the same chips in huge numbers, and they pay more for them. Rest of World reports that phones already on the shelf cost about 15 per cent more than at the start of the year, and new models are priced roughly 25 per cent above last year's. The rise is uneven: about 21 per cent in India, 19 per cent across Asia-Pacific, and 5 per cent in the United States. Phones under 100 dollars are not getting more expensive so much as disappearing. Shipments, meaning the number of handsets makers send out to shops, fell almost 60 per cent for that price class between April and June, against the same months last year, the research firm IDC says.

The reason sits with three companies. Samsung, SK Hynix and Micron make more than 90 per cent of the world's memory chips, and the firms building AI data centres are now the richer customer. S&P Global expects the biggest American cloud companies to spend more than 1.3 trillion dollars on data centres and their equipment in 2027, up from about 870 billion dollars this year. A cheap phone earns its maker only a thin profit, so when the chip bill rises there is nothing to absorb it. In Southeast Asia, Oppo's shipments of phones under 100 dollars fell 96 per cent, and Vivo moved its main entry-level model above that line in most markets, according to Omdia.

Indonesia is not named in the report. The regional figures cover the brands that fill the cheapest shelf in any phone shop, and last year 173 million phones under 100 dollars were shipped worldwide. The industry group GSMA says a basic phone already costs someone in the poorest fifth of a country about 44 per cent of a month's income, and it had counted on devices at that price to bring nearly 800 million more people online by 2030.

Why it matters

If you are buying a first phone, replacing a broken one, or getting one for a parent, expect fewer choices under 100 dollars and a higher price for what is left, which makes a repaired or second-hand handset the realistic option for many families. The squeeze is hardest where a phone is the only way to reach a bank account, school material or a government service. Analysts in the report expect prices to stay high rather than fall back to where they were before 2025.