AI data centers are driving demand for memory chips, pushing phone makers to raise prices and abandon some of their most affordable models.

The world’s cheapest smartphones are disappearing because AI infrastructure is absorbing the components.

Prices of existing smartphone models have risen by about 15% globally this year, while newly launched models are roughly 25% more expensive than last year. A global memory chip shortage, driven by demand from AI data centers, is pushing up the cost of making smartphones.

Chinese smartphone makers — which have championed affordable, feature-rich devices and account for approximately 60% of all smartphones shipped globally — have “drastically reduced” their entry-level projects this year as memory-chip costs have risen, Ivan Lam, senior analyst at research firm Counterpoint, told Rest of World. They are instead prioritizing more profitable premium devices.

The smartphone price increases vary sharply by region: They have risen by 21% in India, 19% across Asia-Pacific, and 18% in the Middle East and Africa. In the U.S., they have gone up by just 5%.

The shift could affect more than consumers looking for cheaper phones. For people who have yet to buy their first smartphone, higher prices could make it harder to get online at all — potentially widening the digital divide. The consequences will also reach the U.S. as more essential services move online and the global supply chain for smartphones becomes more expensive.

GSMA, the global mobile industry association, had earlier said nearly 800 million more people will use mobile internet by 2030.

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