Memory Chip Crisis Drives Decade-High Smartphone Sales Drop

The smartphone market in India is bracing for its worst sales performance in a decade, driven by a global shortage of memory chips that has pushed device prices to record highs. This downturn arrives during the crucial festive season, which traditionally accounts for the bulk of annual electronic goods sales. The spike in component costs has made even entry-level devices significantly more expensive, eroding the affordability that once drove mass adoption in the country.

Market analysts project that smartphone sales will fall by approximately 25 percent in the current quarter, dropping from 48 million units a year ago to about 36 million. This sharp contraction threatens the stability of a $45 billion industry, with retailers warning that without a strong festive season, many small businesses may be forced to shut down or pivot to other product categories. The situation marks a significant reversal from last year, when premium devices saw strong demand and growth.

Chip shortages drive steep price hikes

The core issue is a global memory chip crisis that has constricted supply chains and inflated manufacturing costs. According to data reviewed by Mint, popular budget brands such as Vivo, Oppo, Realme, and Xiaomi have seen their device prices rise by nearly 40 percent in some cases. This price inflation has hit the sub-15,000 rupee segment hardest, a category that previously accounted for more than half of all smartphones sold in India. Buyers in this segment are now finding fewer affordable options, leading to a significant drop in purchase intent.

Even premium manufacturers are adjusting their strategies in response to the cost pressures. Apple, which saw record sales volumes in the previous festive season due to discounts on older models, has increased prices for its newer devices. The iPhone 17, for instance, saw a 20 percent price increase, while the iPhone 16 also became more expensive. Analysts from International Data Corporation (IDC) expect that Apple’s sales will not grow during this festive period, as the lack of significant discounts removes a key driver of previous demand.

Consumers delay purchases and seek alternatives

Faced with higher prices and reduced discounts, consumers are changing their buying behavior. Many are choosing to delay their purchases until prices stabilize, while others are turning to the secondary market for refurbished devices. Reports indicate that demand for used iPhones has continued to rise in India, with prices for second-hand units nearly doubling over the past year. This shift reflects a broader trend of consumers extending the usage lifespan of their current phones, a trend that is further suppressing new device sales.

Industry experts warn that this weakness could persist well into 2027. Faisal Kawoosa, founder of electronics consultancy Techarc, noted that the industry is now hinging its recovery on its ability to bounce back from a very weak year. Navkendar Singh, associate vice-president at IDC India, stated that the market is facing a steep downward spiral, with full-year sales potentially dropping to 124 million units. The prolonged nature of the chip shortage suggests that relief is unlikely to arrive before the next major holiday season.

Retailers face existential financial pressure

The festive season is critical for the survival of many electronics retailers, as it typically generates the majority of their annual profits. Kailash Lakhyani, founding chairperson of the All-India Mobile Retailers Association (Aimra), stated that without a strong performance during these months, retailers will be forced to either close their doors or diversify into other product categories. Many are already beginning this transition, signaling a structural shift in the retail landscape. The lack of discounts and short supplies have left merchants with little room to maneuver, exacerbating the financial strain.

Aimra has written to major smartphone manufacturers in the country, inquiring about the short supplies and the absence of promotional pricing. However, detailed questionnaires sent to brands like Vivo, Oppo, Realme, and Xiaomi did not receive responses until the time of publication. The silence from manufacturers leaves retailers and consumers in uncertainty about when the market might stabilize. For now, the combination of high chip costs and cautious consumer spending is creating a challenging environment for the entire electronics supply chain.