Why AI could make your next smartphone more expensive

Africans planning to buy a new smartphone this year may have to spend more as rising AI demand makes the cheap devices that helped millions get online more expensive to produce.

Africa’s smartphone market is heading for its first annual slowdown in three years as rising device prices squeeze consumers, with global technology market research firm Omdia forecasting a 26% decline in shipments in 2026.

The research firm said on Thursday that smartphone shipments across the continent fell 7% year-on-year to 17.8 million units in the second quarter of 2026.

The decline was particularly pronounced at the lower end of the market, which is crucial to expanding connectivity across the continent. Shipments of smartphones priced below $100 fell 34% year-on-year, representing a decline of nearly three million devices.

Rising memory and semiconductor costs, partly linked to the boom in artificial intelligence infrastructure, are squeezing manufacturers, making the cheapest devices harder to produce profitably and pushing vendors towards more expensive phones. For consumers, this means fewer options at the bottom of the market and a bigger bill when it is time to replace their phones. 

The average selling price of smartphones in Africa increased by $41 year-on-year to $202, reflecting both higher device prices and a shift towards more expensive phones. Smartphones already cost an average of 24% of monthly income in the region. 

“We’re witnessing a forced upward shift in the African market,” said Manish Pravinkumar, principal analyst at Omdia. “Vendors can no longer profitably manufacture $75 smartphones, while consumers who need connectivity are increasingly having to stretch their budgets towards $200-plus devices.”

Why smartphones are getting more expensive 

Smartphone manufacturers are facing higher costs for the components that go into their devices as demand for memory and semiconductors grows. The AI boom is pushing technology companies to buy large quantities of chips and memory for AI infrastructure, increasing competition for some of the same components used in smartphones.

In December 2025, Micron Technology, an American multinational semiconductor company, exited its consumer-focused crucial business to concentrate on areas where demand was growing faster, including memory and storage for data centres. 

“The AI-driven growth in the data center has led to a surge in demand for memory and storage. Micron has made the difficult decision to exit the Crucial consumer business in order to improve supply and support for our larger, strategic customers in faster-growing segments,” said Sumit Sadana, executive vice president and Chief Business Officer at Micron Technology. 

In May, BT, the British multinational telecommunications company, said smartphone prices could rise as technology companies buy up semiconductor chips amid the AI boom. Apple in June raised prices of MacBooks and iPads as it passed the rising cost of memory to consumers. 

Sunil Taldar, Airtel Africa’s chief executive officer, also admitted to investors on July 23 that global chipset pricing was putting pressure on the cost of some of its devices.

The result is a difficult choice for smartphone manufacturers. Raising prices risks pushing consumers away, but maintaining ultra-cheap devices is becoming less profitable. Pravinkumar said vendors can no longer profitably manufacture smartphones priced around $75, forcing the market towards devices costing $200 or more.

What this means for buyers 

More than four in every five smartphones sold in Nigeria and across Africa in 2025 were priced below $200. Affordability is the biggest barrier to internet access in the region. 

“Handset affordability has emerged as the single largest barrier to mobile internet adoption across Africa,” GSMA, the industry body for telecom operators, said in a new report on Africa. “Despite mobile broadband coverage now reaching the majority of the continent’s population, 63% of Africans remain offline – not because of a lack of network coverage, but because of the cost of devices, services and sector-specific levies.” 

As these cheaper phones become harder to produce, consumers who would previously have bought an entry-level smartphone may have to delay their purchase, buy a more expensive device, or settle for a less capable one. 

Nigeria’s smartphone market declined 11% in Q2 as higher device prices led consumers to delay purchases, according to Omdia. TechCabal reported in June that smartphone prices in Nigeria would rise by up to 30% in 2026, threatening affordability for millions who rely on mobile phones to get online. 

A $100 smartphone in Nigeria currently costs about ₦135,041, or 92.92% more than the country’s minimum wage of ₦70,000 ($51.84). Nigeria has an estimated 96.27 million smartphone users, compared with a population of more than 200 million. 

According to GSMA, an entry-level smartphone still consumes nearly half of a low-income earner’s monthly income, keeping millions of Nigerians reliant on older 3G and 4G handsets. Six in ten Nigerians were offline in 2025 because they cannot afford smartphones. 

Higher prices could widen that gap. People who already own smartphones may delay replacing them, while those who do not own one may have to wait even longer to afford one.

Beyond Nigeria, Egypt’s smartphone market contracted 26% as manufacturers implemented significant mid-quarter price increases in response to a 50% increase in local production input costs since January. Kenya’s smartphone market fell 15%, driven by rising device prices, particularly in the sub-$150 segment where demand remained concentrated.

South Africa was the exception among the markets tracked by Omdia. Smartphone shipments grew 17% year-on-year as consumers continued moving towards 5G devices and higher-priced smartphones, the research firm said.

How phone makers are responding 

Faced with unavoidable price increases, Pravinkumar argues that vendors are adjusting product portfolios, inventory, financing and pricing, and operational execution to defend market share and profitability.

“Rather than passing the full impact of higher component costs on to consumers, vendors are carefully rebalancing specifications to maintain a strong value proposition at existing price points,” he said. “This may mean prioritising features that matter most to buyers—such as battery life, display quality, storage and camera performance—while optimising less visible components to manage costs.”

In other words, a $100 smartphone in 2026 may not look the same as one from previous years, even if the price remains the same.

Manufacturers are also turning to financing rather than discounts, according to Pravinkumar. Partnerships with financing companies such as M-KOPA and Watu, as well as mobile operators such as Safaricom, allow consumers to spread the cost of a phone over time without eroding the average selling price. 

“Some vendors are scaling back their participation in the ultra-budget segment, where profitability has become increasingly difficult to sustain, a sign that at the bottom of the market, margins are running out of room,” he said. 

TRANSSION, which owns TECNO, Infinix and itel, remains Africa’s largest smartphone vendor with a 47% market share in Q2 2026. But shipments fell 14%. Samsung, which has greater exposure to higher-priced devices, gained ground, with shipments rising 15%.

This reflects the changing economics of Africa’s smartphone market. Vendors with greater exposure to the cheapest devices are being hit harder as component costs rise and consumers become less able to absorb higher prices.

Omdia expects device financing to remain relevant as vendors and other industry players seek ways to make more expensive smartphones affordable to consumers. But financing will not change the underlying device cost, and will only spread the impact over time. 

For consumers, for whom smartphones have increasingly become the gateway to data consumption, digital payments, work, and more, the question is therefore no longer just whether smartphone prices are rising. It is how much more they will have to spend to stay connected. 

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