As semiconductor manufacturers prioritise these higher-value applications, capacity available for conventional memory and other components used in consumer electronics can become tighter.

- Jinal Shah, Co-founder and Chief Marketing Officer of semiconductor startup IndieSemiC

Semiconductor makers are diverting production capacity from memory chips that cater to smartphones and other consumer electronics to focus on higher-value applications like AI. 

If there had been enough semiconductor availability, there wouldn’t have been a problem. But there isn’t. India still imports 90-95% of its semiconductors, according to NITI Aayog.

Jinal Shah, Co-founder and Chief Marketing Officer of semiconductor startup IndieSemiC, told The Secretariat: “As semiconductor manufacturers prioritise these higher-value applications, capacity available for conventional memory and other components used in consumer electronics can become tighter.”

AI data centres need specialised processors and powerful memory. High Bandwidth Memory (HBM) is memory that can access data quickly. 

But this may impact the supply and price of the older Dynamic Random-Access Memory (DRAM) and Not-AND (N-AND) memory technologies used in smartphones, laptops, and other gadgets.

While it is not the only reason behind rising smartphone prices, it is fast turning out to be an important one.

AI data centres are absorbing growing supplies of HBM, putting pressure on the availability and pricing of conventional memory used in smartphones, laptops and other consumer electronics.

- Jaspreet Singh, Partner at Grant Thornton Bharat LLP

Technology companies are busy building data centres in India, and their requirement for high-performance processors and advanced memory is growing. India has 16 data-centre facilities under construction and another 49 planned, according to DC Market Insights' tracker.

Impact On Smartphones

Jaspreet Singh, Partner at Grant Thornton Bharat LLP, told The Secretariat: “AI data centres are absorbing growing supplies of HBM, putting pressure on the availability and pricing of conventional memory used in smartphones, laptops and other consumer electronics.” 

TrendMicro, a global cybersecurity leader that secures the exchange of digital information for over 500,000 commercial clients, has forecast that conventional DRAM and N-AND prices will rise in double digits in the third quarter of 2026. 

Smartphone prices are simultaneously showing an upward trend. 

Apple raised the base iPhone 17 price in India by ₹17,000, from ₹82,900 to ₹99,900 in September 2026. This was widely attributed to global memory shortages and rising production costs.

The bigger shift may be ‘buy less often, but buy more deliberately’.

- Deepak Chawla, Managing Director of Protiviti Member Firm for India

Price changes are not driven by AI-related memory demand alone. The movement of currency, the cost of the chipset, and other components can also impact retail prices. 

Singh spelt out rupee depreciation as another pressure point for manufacturers, especially in the budget smartphone segment, which has thin margins and price-sensitive consumers.

The cost of the Nothing Phone (4a) 8GB/128GB variant has gone up from ₹37,999 to ₹39,999 in the last three months. 

Singh described how manufacturers are managing these pressures, “Manufacturers are responding through a combination of retail price increases, reduced promotional discounts, lower margins, and changes to product configurations, including RAM and storage options.”

These changes may result in higher device cost or lower specs at the same price.

Deepak Chawla, Managing Director of Protiviti Member Firm for India, told The Secretariat, “The bigger shift may be ‘buy less often, but buy more deliberately’.”

The comment points to a possible change in consumer behaviour if smartphone prices rise or upgrades become less attractive.

Semiconductor Bill 

India's semiconductor product imports have increased from ₹11.9 billion in FY 2020-21 to ₹30.3 billion in FY 2024-25, says the NITI Aayog report. 

India continues to rely on imports for advanced processors, DRAM/N-AND memory, high-end display panels, semiconductor manufacturing equipment, specialised materials, advanced printed circuit boards (PCBs) and passive components. 

While domestic electronics assembly has grown, the production of some key inputs is limited. This puts manufacturers at the risk of price volatility, currency fluctuations, geopolitical uncertainty, and extended lead times.

China, the world leader in smartphone manufacturing, is faring far better when it comes to semiconductor supply.

Its strength is not just in producing electronics on a large scale but also in its component supply chain. The proximity of PCB suppliers, displays, batteries, and connectors to assembly plants shortens lead times, logistics costs, and inventories. 

Chinese smartphone manufacturers also have access to established component clusters, economies of scale, and decades of manufacturing experience, which enable them to source inputs competitively.

For India’s smartphone industry, the strengths lie in semiconductor design, engineering talent, and electronics assembly, but it must build up component manufacturing, increase component productivity, supplier quality, and access to competitive financing.

Singh said, “The central challenge is to increase domestic value addition rather than just the volume of finished devices assembled in India.”

Indian manufacturers would benefit from a more robust local supply chain, which would enable them to benefit from increased value capture and mitigate external cost shocks.

Can Semiconductor Push Help?

The Indian semiconductor programme aims to develop indigenous production capacity. 

As reported in September by the Press Information Bureau (PIB), 12 semiconductor manufacturing units have been sanctioned so far, with an investment commitment of ₹1.64 lakh crore. 

But investment decisions and plant capacity do not necessarily lead to less reliance on imports. Specialised equipment, materials, skilled workers, reliable supplies and commercially viable manufacturing processes are also needed for the production of semiconductors.

Singh outlined the potential timeline for building domestic capabilities, “Packaging and testing facilities, along with selected component plants, can strengthen domestic supply chains over the next one to three years.”

He said it would take three to five years or more to establish broader import substitution, and five to 10 years or more to develop a competitively configured semiconductor fabrication ecosystem. 

He also noted that policy priorities were PCBs, capacitors, connectors, semiconductor packaging and testing, specialised materials, and domestic design.

Shah emphasised the importance of strengthening domestic production while remaining connected to global supply chains, “Semiconductor supply chains are inherently global, so the focus should be on building strong domestic capabilities in critical areas while maintaining diversified international partnerships.”

The country's resilience can be enhanced by not manufacturing all the components. It must have competitive strengths in key areas, more supply sources, and diversified global relationships.