Handset business fading on spike in memory prices; smartphone market could shrink more than 13% this year

New Delhi: India’s smartphone market could shrink more than 13% this year, as a sharp increase in memory cost is expected to drive up device prices by 15-40%, making them out of reach for many budget customers and pushing small shop owners out of business, retailers and experts said. Falling sales and rising cost could also hurt the margins of smartphone companies, particularly smaller local brands, industry experts said.

The impact was already visible in February when sales slumped 35%, retailers told ET. It will remain the same or get worse in March, traditionally a weak month for sales as customers often have less disposable money after making income tax and other fiscal-year-end payments, they said. With memory chip prices set to rise further and supplies fall short, they expect further damage in the coming quarters.

Navkendar Singh, associate vice-president at market research firm IDC India, predicted India smartphone shipments to fall to 132 million units in 2026 from 152 million last year, hurt by rising device prices. “The current situation has no silver lining to bounce back very soon,” Singh told ET.

Except for 2022, when sales fell 10%, the local handset market grew in the past five years. Retailers called the current situation unprecedented.

Consumers are pulling back as cheap models have become unavailable, said the All India Mobile Retailers Association (AIMRA). Traditional “volume drivers” are missing from the shelves due to severe supply issues, leaving retailers with dwindling walk-ins and unsold premium inventory, the industry body said.

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Absence of Discounts

As per a recent analysis by the association, the ‘general trade’ sector, comprising offline retailers, witnessed a 35% drop in business during February 2026, marking one of the toughest periods for mobile retailers in recent history. Combined with a lack of credit from brands due to stock shortages, many of these phone sellers may find it nearly impossible to survive the slump, retailers said.Major brands have increased prices by up to 30% since November, retailers said. In contrast, the mobile industry has historically seen a 10% price discount every quarter. The absence of this discount, combined with the 30% hike, means consumers are facing a 40% effective price impact, they said.

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“Consumers are choosing to delay new purchases or are exploring the second-hand market rather than paying these inflated prices,” said AIMRA founder-chairman Kailash Lakhyani. “If this trend continues, we could see a ₹10,000 entry-level phone touching the ₹20,000 mark by the end of the year,” he told ET.