AI is killing the cheap smartphone - David Oks

David Oks

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AI is killing the cheap smartphone<br>The global memory crunch and the great repricing of consumer electronics

David Oks<br>May 21, 2026

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One of the most remarkable things about the last few decades is how cheap computers have gotten.<br>In 1985, if you were a reasonably affluent American, the best computer that you could afford was the IBM PC AT. The PC AT would cost you about $6,000—$19,400 in 2026 dollars—and thus represented about a quarter of the median American’s annual income; and it ran on an Intel 80286 processor, capable of something like 900,000 instructions per second. Today, if you find yourself in a market stall in Nairobi or Lagos, you’ll be able to find a cheap smartphone—like the Tecno Spark Go, manufactured by China’s Transsion—for somewhere between $30 and $120. That phone will run on a processor capable of billions of calculations per second.<br>In other words: you can buy a computer thousands of times more powerful than the best consumer device from 40 years ago, for something like 0.3 percent of the price. No other good in history has experienced a decline in cost on that scale: poor people can now carry around in their pockets computers many orders of magnitude more powerful than what the richest slice of the world’s population could afford a few decades ago. And that great cheapening of consumer electronics has enabled a diffusion of computing power to the world’s population that is nothing short of miraculous. Hundreds of millions of the world’s poorest people are able to access the internet because of cheap smartphones like the Tecno Spark Go.<br>That era is now coming to an end.<br>In 2026, the International Data Corporation, which tracks the smartphone market, predicted that worldwide smartphone shipments would fall 13 percent, their largest single-year decline ever. The crash would be most intense in Africa and the Middle East, where smartphone shipments would fall by more than 20 percent, and would be concentrated in the cheapest end of the smartphone industry. This shock represented not a temporary blip but indeed “a structural reset of the entire market”: a huge share of the world’s population is getting priced out of smartphone ownership.<br>So the trend of the last few decades, of consumer electronics getting better and cheaper every year, faces a sharp reversal: the poor world is now entering a smartphone crisis.<br>This is happening for a simple reason.<br>Smartphones, like other computers, use memory: and the global supply of memory is remarkably inelastic, because memory is really hard to produce. For a long time, most memory went to smartphones and laptops; but in the last few years, AI has emerged as an enormous and hugely profitable consumer of memory. This has resulted in a huge reallocation of memory away from consumer electronics and toward AI. The inevitable result is that smartphones are much more expensive to make now than they were a few years ago. In the short term, this means that the cheap smartphone, which spread computing and internet access to the poorest parts of the world, is dead.<br>But at the rate that things are going, it seems like the poor world will only be the first to get hit. If AI consumption continues to grow at current rates—or if it accelerates, as seems manifestly possible—it won’t be long before the smartphone crisis spreads to the rich world. Consumer electronics are about to get much more expensive.<br>It’s just the memory that you have

Smartphones are computers. They’re very small computers, and also have things like touchscreens and radios. But in terms of their internal architecture, smartphones are basically the same as what you’d get with a laptop or a server. They have a processor that performs calculations and runs the logic that makes the device do what you tell it to do. They have memory that holds the data that the processor is currently working on. They have storage that retains data when the device is turned off. And they have a circuit board that connects all these different things together.<br>The big story of computing over the last few decades is the processor. You can think of the processor as a huge array of transistors—tiny switches that flip ON and OFF to perform logical operations. We’ve done a good job—a very good job—of figuring out ways to make transistors smaller and more efficient, which means that processors have improved at an exponential rate over the last few decades. This is Moore’s Law.<br>But processors can only process the data that they have access to: and the data that they have access to is what they get from memory: specifically, in modern computers, from DRAM, “dynamic random access memory.” Here the story is very different. DRAM has gotten better; but it hasn’t gotten better at anything like the rate that processors have: in the 1980s and ‘90s, processor speeds improved at 60 percent per year, while DRAM speeds improved at just 7 percent per...