This Festive Season, Smartphone Buyers Have To Pay More And Expect Less

By Katya Naidu

What?

This festive season, shoppers looking for new phones could be a tad disappointed. Instead of discounts and offers, they’d be met with higher prices and lower specifications. 

The industry has been facing supply-side challenges with rising costs of memory and other components, forcing most equipment makers to take multiple rounds of price hikes. And that is going to affect the cheaper smartphones that are popular in India. 

The average smartphone price went up by 15% by the end of the second quarter, found Counterpoint Research. 

“New phones are getting expensive, and the prices of existing phones are going up. From January to July this year, the prices of almost 95% of the models have increased. Apart from Apple, everyone has increased the prices of their existing smartphone models,” Tarun Pathak, vice president at Counterpoint Research, told The Core in a podcast. 

Wholesale smartphone shipments fell to the lowest first half in the last five years — narrowing by 11.1% to 33.2 million, showed IDC data. 

The outlook for the second half of the year is much bleaker. 

“Rising prices are now touching every corner of India’s smartphone market. Festive discounts, typically the trigger for purchases, look unlikely this year as cost pressure builds through H2 2026. Shipments are set to decline by over 15% in the second half, taking full-year volumes down to roughly 128-130 million units,” Upasana Joshi, senior research manager, devices research at IDC Asia/Pacific, told The Core.  

Why? 

The domino effect of rising smartphone prices starts with extensive artificial intelligence-led demand, pushing up memory chip prices by 4.5 times what they were last year. 

According to Madhur Singhal, managing partner at Praxis Global Alliance, the underlying cause is a structural shift of global chip capacity toward AI infrastructure, and not a cyclical swing. 

“Hyperscalers are spending heavily on AI infrastructure and locking in memory supply well in advance, pulling manufacturers to prioritise higher-margin AI memory over conventional consumer chips. Mobile-grade memory specifically is running at several times year-ago levels. No real relief is expected for another year or two,” Singal told The Core. 

Memory chip prices have flipped the economics of manufacturing a smartphone. Earlier, memory had a 12% contribution towards a smartphone. Now, with extensive cost inflation, it has gone up to almost 45% 40-45%. Entry-level phones are the worst hit and have little or no legroom to increase prices. 

What Next? 

There is little legroom, as memory prices are increasing progressively every quarter, shifting the cost economics away from affordability. 

“There are certain original equipment manufacturers (OEMs) that have launched LCD versions, where they replace OLED with LCD. They have cut down on the front camera, the selfie camera, and charging specifications. But even doing that, you can't control the overall price,” said Pathak. 

As a temporary response to rising prices, a few OEMs have also reintroduced older-generation 4G phones. “Entry-level 5G devices have grown steadily costlier this quarter (Q2), pushing several brands to reintroduce or extend 4G models to hold their footing in the segment, lifting 4G’s share to 11.1% as a supply-led stopgap move,” says IDC. 

But this cushion might not last forever as eventually consumers will have to shift back to costlier 5G phones as the older inventory of 4G phones runs dry.

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53%

That’s the proportion of middle-income households across India’s top 100 cities, up from 29% a decade ago, according to a new report by People Research on India’s Consumer Economy (PRICE) and Tata Sons Research.

The report defines middle-income households as those earning Rs 6-36 lakh a year, at 2025-26 prices. It says this group has enough economic security for discretionary spending, savings, education, healthcare and asset creation.

Pivot: The report points to a broader shift in India’s urban economy, with growth spreading beyond the biggest metros. By 2030-31, middle-income households could account for 60% of households across the top 100 cities. High-income households have also surged, rising from 3% to 12% over the past decade.

Fast Facts:

• Big six still dominate: Delhi, Mumbai, Bengaluru, Hyderabad, Kolkata and Chennai make up just 7.6% of India’s population, but generate 18.1% of national income and 30.3% of national savings.

• Smaller cities are spending big: Chandigarh has the highest average household spending, while households in Amritsar, Ahmedabad and Jabalpur spend more than Mumbai.

• Surat stands out: Outside the Big six, Surat has the largest consumption market in India, with average household consumption higher than Bengaluru.

• Bengaluru saves the most: Households save Rs 13 lakh a year on average, the highest across the 100 cities.

• Chennai has the highest debt burden relative to income: Its debt-to-income ratio is 27.7%, the highest among the 100 cities and well above the 100-city average of 16.6%.

But smaller cities face financial pressure. One in four households in frontier cities, the 50 smallest cities among the top 100, live under chronic or periodic financial pressure. Around 15% struggle to meet routine or unexpected expenses, such as healthcare, education, utility bills and loan repayments. More than 10% are overstretched enough to struggle with routine expenses, the highest share across the four city tiers.

A Shared Registry To Curb Mule Frauds?

The Indian banking industry should collaborate on sharing data related to mule accounts for effective fraud prevention, said senior bankers at a meeting in Mumbai.

Context: Speaking at a closed-door roundtable organised by The Core and The Bureau on the topic "Fraud Moves as a Network. Why Doesn't Defense?", bankers said the industry lacks a body equivalent to credit bureaus that provide credit scores on retail customers. Mule accounts taken down by one bank often resurface at another to defraud customers, since banks do not share this data.

Impact: Bankers said they face a serious challenge in balancing customer experience with fraud protection as stricter security measures create transaction friction, which risks driving away valuable customers. More than Rs 22,000 crore was lost by customers in 2025 to phishing, investment fraud, and digital arrest scams, and the numbers are expected to rise further in 2026.

Singapore Backs Air India Bet

Singapore has defended Singapore Airlines’ (SIA) investment in Air India, arguing that the carrier needs to expand overseas to keep growing.

The Lead: Transport Minister Jeffrey Siow told Parliament that SIA, which owns a 25.1% stake in Air India, funds its investments from its own balance sheet and has not asked shareholders for additional capital. He said Air India’s losses do not automatically become SIA’s liabilities.

Catch Up Quick: The defence comes amid growing scrutiny of the investment after Air India reported a $2.33 billion loss for the year ended March and sought around $1.5 billion in fresh equity from its owners, Tata Sons and SIA.

Singapore’s Workers’ Party MP Kenneth Tiong had questioned whether Singapore-linked funds could ultimately be exposed to Air India’s losses.

Siow said SIA’s Air India investment gives it access to one of the world’s largest aviation markets and supports its strategy of expanding beyond Singapore. SIA said its India investments will continue to be funded internally.

Big Names Line Up for Coal Gasification

The Centre's Rs 37,500 crore coal gasification scheme has received 7 applications in its first round, from five companies including NTPC, Adani Enterprises, Talcher Fertilisers, Gallantt Ispat and Shyam Sel & Power, the Ministry of Coal said on Tuesday, Business Standard reported.

Adani Enterprises has submitted three separate applications, all for urea production projects.

Context: The Union Cabinet approved the scheme on May 13, 2026, to convert domestic coal and lignite into higher-value products such as syngas, methanol, ammonia and urea, chemicals India currently imports in large volumes.

These imports were worth around Rs 2.77 trillion in FY25. The scheme builds on the National Coal Gasification Mission launched in 2021 and an earlier Rs 8,500 crore scheme approved in January 2024, under which eight projects are currently being implemented.

Forecast: The government expects the scheme to attract Rs 2.5-3 trillion in investment across 25 projects and create around 50,000 direct and indirect jobs. It aims to build 100 million tonnes of coal gasification capacity by 2030, with 75 million tonnes developed under this scheme.

The coal ministry opened the second application round on September 8, with new windows opening every two months going forward.

Fuel Consumption Down

India's overall fuel consumption fell 6.3% in August compared to the previous month to 18.61 million metric tonnes, the lowest level since September 2024 according to data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry, as Reuters reported.

The August reading was also down 2.8% from a year earlier.

Breakdown: Not all fuels moved in the same direction. Diesel consumption fell 15% from July but was up 6.8% from a year earlier.

Gasoline sales rose 0.5% from July and were up 8.2% from a year earlier.

Liquefied petroleum gas (LPG) consumption remained unchanged at 2.35 million tonnes in August from a month earlier. It was the highest since March but was down about 17.2% from a year earlier.

Fast Facts: India's state-run fuel retailers said on Friday that nationwide testing of E20 petrol found no evidence to support claims of high chloride contamination or moisture and that fuel quality remained within prescribed limits, according to a joint statement.

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