For the first time in the smartphone era, the cheap phone is starting to disappear. Prices are climbing, shipments are falling, and the models that vanish first are the ones at the very bottom, the hundred-dollar handsets that put a first computer into the hands of people who had never owned one. The cause is not a factory fire, a pandemic, or a blocked canal. It is artificial intelligence, reaching all the way from a data centre in Virginia into the phone in a farmer’s pocket in rural Africa. And the policy everyone reaches for when chips run short, the American CHIPS Act, is close to useless against it. Not because the law is bad, but because it was built to fight a completely different war.
Not That Kind of Shortage
It is tempting to file this alongside the chip shortage of 2020 to 2023, when the pandemic snarled supply chains and everything from cars to game consoles ran short. That crisis was an accident. This one is a decision. The world’s memory comes overwhelmingly from three companies, Samsung, SK Hynix, and Micron, which, between them, make more than ninety percent of all DRAM. Over the past two years, all three have made the same choice: to point their limited factory space at high-bandwidth memory, or HBM, the specialised chips that stack inside AI accelerators, and away from the ordinary memory that goes into phones and laptops.
The reason is money, and the gap is not small. A single HBM module sells for something like sixty to a hundred dollars, against five to ten for a comparable slice of the conventional DDR5 that a phone uses, and every gigabyte of HBM eats three to four times the factory capacity. Faced with arithmetic like that, a rational manufacturer builds the AI chip every time. The big cloud companies, Google, Meta, Microsoft, and Amazon, have locked up years of the resulting supply on long-term contracts. Everyone else now waits. The industry even has a nickname for the squeeze that followed: RAMmageddon.
Stand in Line Behind the Hyperscalers
For phone makers, the effect has been brutal, and the language the analysts use is blunt. Tarun Pathak of Counterpoint Research described memory suppliers telling handset vendors to “stand in line behind the hyperscalers.” Global smartphone shipments are forecast to fall by around thirteen to fourteen percent in 2026, to roughly 1.08 billion units, the steepest annual drop the industry has ever recorded. Device makers have at times received only half to two-thirds of the memory they ordered. Memory, once a modest line on the bill of materials, now accounts for more than sixty percent of the build cost of a budget phone, close to double what it was six months earlier. Some models are quietly shipping with less RAM than the ones they replace, a trick the trade calls spec shrinkflation. And the pain reaches well beyond phones: PC makers have warned of price rises of fifteen to twenty percent, and even Tesla’s Elon Musk has spoken of hitting a “chip wall” as the same memory his cars need is swallowed by AI.
The Cheapest Phone Is Disappearing
The cost of all this does not fall evenly, and that is the part worth slowing down for. The brands hurt most are the ones that built their business on cheapness: Transsion, the group behind the budget names that dominate African markets, along with Xiaomi, Oppo, Vivo, and Honor. They run on thin margins and sell memory-heavy devices at low prices, which leaves them no room to absorb a doubling in the cost of a core component. Transsion’s shipments are forecast to fall by about a third this year, Xiaomi’s by close to that. In India, the market for phones under a hundred dollars collapsed by around sixty percent in a single quarter. Across the Middle East and Africa, whole regions built on the affordable handset are contracting sharply.
At the other end, the picture inverts. Apple locked in its supply early and sells at prices that can absorb the shock; it is heading for its highest annual market share ever in the very year the overall market shrinks the most. Samsung, which makes its own memory, has an in-house shield its rivals lack, and has used it to hold prices on some budget models and take share. So the AI boom, born in the richest corners of the technology industry, is landing hardest on the poorest buyers in the world, the first-time owners for whom a small rise in price is the difference between having a smartphone and not. A shortage that begins in a data centre ends as a quiet setback for digital inclusion.
Why the CHIPS Act Cannot Help
Which brings us to the law in the headline. The American CHIPS and Science Act, passed in 2022, set aside tens of billions of dollars to bring chip manufacturing back to the United States, reduce its dependence on Taiwan, and build advanced fabs on home soil. It is a serious piece of industrial policy. It is also close to irrelevant to the phone in your hand for three reasons.
The first is time. Fabs take years to build. The memory projects the Act helped fund, Micron’s giant complex in New York, its plant in Idaho, and SK Hynix’s site in Indiana, are aimed at production starts somewhere between 2027 and 2030. Micron’s New York megafab, the single largest planned addition of capacity, broke ground early in 2026 and will not turn out its first chips until around 2030. The factory that would help the most arrives last.
The second is what they will make. The nearest new capacity coming online is built for HBM, the AI memory, not the conventional kind a phone needs. Even the new fabs, in other words, are being pointed at the data centre rather than the handset.
The third reason is the deepest. This shortage is not caused by a lack of factories in America. It is caused by a choice, made by three companies with most of their plants in Asia, to sell the more profitable product. You can subsidise a company to build a fab. You cannot subsidise it into preferring cheap phone memory over lucrative AI memory. The CHIPS Act can pour concrete. It cannot change the arithmetic that is driving the whole crisis.
When It Actually Eases
So when does the pressure lift? The honest answer, from the people who run these companies, is: not soon, and not because of any government. Intel’s chief executive has said there will be no relief until 2028. Analysts at Counterpoint and IDC point to late 2027 at the earliest, and only if AI demand somehow cools, which almost no one expects. The chairman of SK Group has warned that the shortage could run past 2030, and Deloitte has floated 2029 or 2030 as the point when serious new supply finally arrives. Between now and then, the cheap phone stays scarce and the whole market keeps drifting upmarket, whether or not a single new American fab opens on schedule.
The Shortage Is the Point
None of this is a glitch waiting for a patch. It is the AI boom reaching into the ordinary electronics of everyday life and taking the memory for itself, and it is being felt first and worst by the people with the least. The CHIPS Act was built to win a race for the most advanced chips on earth, not to keep a hundred-dollar phone within reach of someone buying their first one. Those are different problems, and the law answers only the one it was designed for. Until the companies that make the world’s memory decide there is more money in phones than in AI, or until enough new capacity finally floods in toward the end of the decade, the shortage will go on doing exactly what it is already doing. A law can build a factory. It cannot tell the factory to care about you.
References:
- Wikipedia: “2025 to present global memory supply shortage.” https://en.wikipedia.org
- International Finance: “RAMageddon: The memory crisis crushing consumer electronics.” https://internationalfinance.com
- Memeburn: “Smartphone Market Decline 2026: Why Phones Cost More & What’s Next.” https://memeburn.com
- TechTimes: “Memory Now Costs 60% of a Budget Phone: AI Just Killed the Cheap Smartphone.” https://www.techtimes.com
- SoftwareSeni: “When Will the Memory Shortage End, and What the Fab Timelines Actually Tell Us.” https://www.softwareseni.com
- GamesBeat (Deloitte): “RAMageddon: Why the memory chip crisis is worse than expected, lasting to 2029 or 2030.” https://gamesbeat.com
- Tech-Insider: “2026 Memory Chip Shortage: SK Hynix Warns It May Last Past 2030.” https://tech-insider.org