The artificial intelligence boom is beginning to exact a visible cost on consumers, and India’s smartphone market is emerging as one of the clearest examples of how the massive buildout of AI infrastructure is reshaping global electronics supply chains.

As memory manufacturers divert production toward high-margin AI chips used in data centers, the supply of conventional memory for smartphones has tightened, pushing handset prices higher and triggering the sharpest slowdown in India’s smartphone market in six years.

The development provides one of the strongest pieces of evidence yet that AI’s unprecedented demand for semiconductors is no longer confined to data centers and cloud infrastructure. Instead, it is now influencing consumer electronics markets by altering manufacturing priorities, pricing dynamics and purchasing behavior.

India, the world’s second-largest smartphone market after China, recorded a 10% year-on-year decline in smartphone shipments during the April-June quarter, according to Counterpoint Research. The drop marks the steepest June-quarter contraction since 2020 and significantly exceeds the 2% decline recorded in China, according to TechCrunch, highlighting how AI-driven supply constraints are disproportionately affecting price-sensitive markets.

At the center of the disruption are memory chips.

The DRAM and NAND flash chips used for smartphone RAM and storage are manufactured on production lines that increasingly compete with high-bandwidth memory (HBM), the advanced memory technology essential for Nvidia’s AI accelerators and similar processors from AMD, Intel, and custom AI chip developers.

Over the past two years, memory manufacturers including Samsung Electronics, SK Hynix, and Micron have aggressively shifted manufacturing capacity toward HBM because it commands substantially higher margins than conventional smartphone memory. Producing HBM is also considerably more complex, requiring advanced packaging technologies and longer production cycles, limiting the industry’s ability to simultaneously expand the output of traditional memory chips.

The consequence has been a tightening supply of standard memory components used across smartphones, tablets, PCs, and other consumer devices. Months ago, semiconductor analysts warned that booming AI infrastructure investment would eventually ripple through consumer electronics by raising memory prices. India’s latest smartphone data suggests that the prediction is now materializing.

Unlike China and developed markets, India is particularly vulnerable because of the structure of its smartphone industry.

Around 60% of smartphone sales occur below the 20,000 rupees ($210) price point, where manufacturers compete on thin margins, and consumers are highly sensitive to even modest price increases.

“Higher memory costs have had the biggest impact” in this segment, Tarun Pathak, Counterpoint Research’s vice president of research, told TechCrunch.

India’s importance extends beyond its size. With more than 1.4 billion people and over 700 million smartphone users, the country has become one of the world’s most important indicators of consumer demand in emerging markets. Global handset manufacturers, semiconductor suppliers, and investors closely monitor Indian sales trends because they often foreshadow purchasing behavior across other price-sensitive economies.

Rather than abandoning smartphones altogether, consumers are adapting.

Pathak expects replacement cycles to lengthen to approximately four years, up from about 3.5 years previously, as buyers delay upgrades in response to higher prices.

That behavioral shift could have long-term implications for smartphone manufacturers, many of which rely on increasingly frequent replacement cycles to sustain shipment growth.

The slowdown is also exposing a widening divide between premium and budget smartphone makers.

Samsung was the only major manufacturer to increase shipments in India during the second quarter, posting 2% annual growth, according to Counterpoint. Apple’s shipments declined 3%, although analysts attributed most of the decline to supply constraints and inventory shortages rather than weakening demand.

Premium brands have generally proved more resilient because their customers are less sensitive to price increases and increasingly rely on financing options that spread the cost of expensive devices over several years.

“Consumers buying higher-end smartphones have proved less sensitive to price increases,” Counterpoint senior analyst Prachir Singh told TechCrunch, noting that financing has softened the impact of higher prices.

Budget manufacturers have faced a much more difficult environment.

Shipments in India’s sub-15,000-rupee ($150) smartphone segment plunged 45% from a year earlier, illustrating the severe pressure on entry-level demand.

Chinese smartphone makers have been particularly affected because their businesses remain heavily concentrated in lower- and mid-priced devices. As a result, Chinese brands collectively saw their Indian market share fall to its lowest second-quarter level since 2020.

The pressure is already forcing adjustments across the industry.

This week, Chinese smartphone maker OnePlus announced it would stop launching new products in Europe and North America while maintaining its presence in India after reassessing market economics.

Counterpoint data shows China accounted for 74% of OnePlus’ global shipments in the first quarter, up from 59% a year earlier, while India’s contribution fell to 19% from 30%.

The figures suggest manufacturers are increasingly concentrating resources on markets where scale and profitability remain achievable while retreating from regions offering weaker returns.

Pathak said the economics of operating multiple smartphone sub-brands are becoming increasingly difficult as margins compress.

“Sub-brands normally have overlaps and shared resources, and you need a minimum base to justify the cut-throat margins. Profitability is the key to deciding market operations,” he said.

The industry’s adjustment extends beyond manufacturers to consumers themselves.

According to IDC Associate Research Director Kiranjeet Kaur, India’s smartphone market is shifting from volume-driven expansion toward value-driven growth, meaning fewer devices are being sold but at higher average selling prices.

Memory shortages and rising component costs are making low-priced smartphones increasingly difficult to produce profitably. Counterpoint estimates that smartphone prices in India have risen between 4% and 68%, depending on the model.

Consumers are responding in three primary ways: delaying upgrades, purchasing more expensive models through financing, or turning to the growing secondhand smartphone market.

Financing has consequently become “central to affordability,” Kaur told TechCrunch.

Retailers and smartphone manufacturers are also building inventories ahead of India’s festive shopping season to secure components before further price increases materialize.

IDC likewise expects India’s smartphone shipments to record a double-digit decline during the second quarter, substantially worse than the 4.1% decline recorded in the first quarter and the 5.3% contraction in the preceding quarter.

Although IDC’s estimates have not yet been finalized, Kaur expects memory shortages to remain a defining feature of the industry.

She believes elevated smartphone prices are likely to persist through at least the end of 2027, although the pace of price increases should gradually moderate as supply expands and consumers adjust to permanently higher pricing.

India also faces an additional challenge absent in many other markets.

The depreciation of the Indian rupee has made imported components more expensive, further squeezing manufacturer margins and amplifying the effect of rising memory costs.

“For Indian consumers, it is a double whammy as the weaker currency makes imports costlier, which has added to margin pressures for the market players, and they are passing on the cost to the consumer,” Kaur said.

For years, smartphone demand largely dictated investment decisions for memory manufacturers. That hierarchy has now been reversed.

Today, AI infrastructure has become the industry’s dominant growth engine. Hyperscalers including Microsoft, Amazon, Google, Meta and OpenAI are investing hundreds of billions of dollars in AI infrastructure, generating unprecedented demand for high-bandwidth memory alongside advanced GPUs, networking equipment and chip packaging technologies.

Because memory fabrication capacity cannot be expanded overnight, manufacturers have naturally prioritized the products offering the highest returns.

India’s smartphone slowdown suggests consumers are becoming one of the first major groups to absorb the downstream consequences of that capital allocation.

U.S. import prices unexpectedly rose in June, highlighting persistent inflationary pressures beneath the surface of the economy as rising costs for capital equipment, technology products, and consumer goods more than offset lower food and fuel prices.

The latest data suggests that while headline inflation moderated during the month due to lower energy prices, imported inflation remains elevated, underpinning the risk that price pressures could reaccelerate if geopolitical tensions drive another surge in commodity prices.

According to the Labor Department’s Bureau of Labor Statistics on Friday, import prices, which exclude tariffs, rose 0.3% in June after an upwardly revised 1.7% increase in May.

Economists surveyed by Reuters had expected import prices to decline 0.7% following the previously reported 1.9% increase in May, making June’s increase a significant upside surprise.

On an annual basis, import prices climbed 7.1% in June, accelerating from 6.6% in May and marking the strongest year-over-year increase since August 2022, when global inflation remained elevated following the post-pandemic supply chain disruptions and energy shock.

Capital Goods And AI Investment Driving Imported Inflation

The report showed that the biggest source of inflationary pressure came from imported capital goods, reflecting continued corporate investment in artificial intelligence infrastructure, advanced computing equipment and digital technologies.

Prices for imported capital goods increased 0.4% in June, extending a broader trend of rising costs for machinery, semiconductor equipment, networking hardware and other technology-related imports as businesses continue expanding AI-related investment.

The increase mirrors the ongoing global AI spending boom, which has driven record investment in data centers, semiconductor manufacturing equipment, servers and networking infrastructure.

Imported consumer goods, excluding automobiles, also rose 0.3%, indicating that inflation pressures extended beyond industrial equipment into household products and retail merchandise. By contrast, prices for imported automobiles, automotive parts, and engines edged down 0.1%, providing a modest offset to broader price increases.

Lower fuel costs helped moderate the monthly increase.

Imported fuel prices declined 0.4% in June after surging 12.6% in May as oil markets stabilized following what was then viewed as a fragile ceasefire between the United States and Iran.

Imported food prices also slipped 0.2% during the month. However, energy prices remain substantially higher than they were a year ago.

Imported fuel prices were still 44.1% higher than in June last year, underscoring how geopolitical instability continues to influence inflation through energy markets.

The June data may also understate future inflation risks.

Since the survey period ended, the temporary ceasefire between Washington and Tehran has collapsed, with renewed military strikes, maritime tensions and disruptions to oil shipments pushing crude prices back to one-month highs. Higher oil prices typically feed into transportation, manufacturing, and logistics costs, raising the possibility that import prices could remain elevated in the coming months.

Core Import Inflation Remains Firm

Excluding the volatile food and fuel categories, so-called core import prices increased 0.4% in June after rising 0.8% in May. Annual core imported inflation accelerated to 4.6%, highlighting that underlying price pressures remain well above levels generally associated with stable inflation.

The persistence of core import inflation indicates that businesses continue facing higher costs for intermediate goods, industrial equipment, and manufactured products even as headline inflation temporarily eased.

Unlike fluctuations in oil prices, increases in capital goods and manufactured imports tend to be more closely linked to investment demand, supply chain conditions and global production costs, making them potentially more persistent.

The report stands in contrast to June’s consumer and producer price data, both of which showed softer-than-expected inflation largely because of lower energy prices during the month. Those reports had encouraged financial markets to scale back expectations for another near-term interest rate increase from the Federal Reserve.

Import prices, however, paint a more nuanced picture.

The data suggest that while falling energy costs temporarily reduced headline inflation, underlying imported cost pressures remain resilient, particularly in sectors tied to technology investment and capital spending. That divergence highlights the importance of monitoring multiple inflation indicators rather than relying solely on consumer prices when assessing inflation trends.

Implications for Federal Reserve Policy

Although the Federal Reserve does not directly target import prices, the report provides another indication that inflation risks have not fully disappeared. Persistent increases in imported capital goods and consumer products could eventually feed into domestic producer prices and consumer inflation if businesses pass higher input costs on to customers.

The resurgence in Middle East tensions further complicates the outlook by increasing the likelihood of renewed energy-driven inflation later this year. With oil prices rising again following the breakdown of the U.S.-Iran ceasefire and disruptions to shipping around the Strait of Hormuz, policymakers may remain cautious about declaring victory over inflation.

Combined with resilient labor market conditions and robust business investment, particularly in artificial intelligence infrastructure, the latest import price data amplifies expectations that the Federal Reserve will continue monitoring incoming inflation indicators closely before making further adjustments to monetary policy.

India’s largest initial public offering (IPO) of 2026 has revealed the depth of domestic capital markets, with SBI Fund Management attracting nearly 2.97 trillion rupees ($30.7 billion) in bids, bolstering confidence that the country’s financial system can absorb a wave of multibillion-dollar listings expected later this year.

The 97.9 billion rupee ($1 billion) offering from SBI Fund Management, a joint venture between State Bank of India and Europe’s Amundi Group, was oversubscribed 41.6 times, highlighting sustained institutional demand even after a volatile first half for Indian equities.

The strongest interest came from institutional investors. The portion reserved for qualified institutional buyers was oversubscribed 140 times, with domestic institutions, including banks, insurance companies, and mutual funds, accounting for the bulk of demand. Retail participation was comparatively modest, with subscriptions reaching 3.6 times the shares allocated to individual investors.

The robust institutional response is widely viewed as an important test ahead of significantly larger IPOs expected to reach the market in the coming months, particularly those of the National Stock Exchange (NSE) and Reliance Jio Platforms, both of which are expected to raise more than $3 billion each, according to Mumbai-based IPO intelligence firm Prime Database.

The successful fundraising also demonstrates that India’s capital markets remain flush with liquidity despite geopolitical tensions, higher energy prices and a rotation of global investment flows toward artificial intelligence-linked companies.

India has been the world’s busiest IPO market over the past two years by number of listings, supported by strong domestic savings, rising retail participation, and expanding institutional investment. However, primary market activity slowed considerably during the first half of 2026 after the U.S.-Iran conflict triggered a spike in crude oil prices, raising concerns over inflation, corporate profitability and economic growth in Asia’s third-largest economy.

Higher oil prices pose a particular challenge for India because the country imports more than 80% of its crude oil requirements. Elevated energy costs widen the current account deficit, increase inflationary pressures, and squeeze consumer spending, weakening one of the key pillars of India’s economic expansion.

At the same time, global investors increasingly redirected capital toward AI-related technology companies, particularly in the United States, where semiconductor and artificial intelligence firms have dominated market returns. India has largely been absent from that rally because it lacks globally competitive AI infrastructure and semiconductor champions, making its equity market comparatively less attractive to international growth investors.

Those headwinds weighed heavily on Indian equities earlier this year. Since January, the benchmark Sensex has declined more than 9.4%, making it one of the weakest-performing major stock indices globally, while the Nifty 50 has fallen 7.9%.

Market sentiment improved after the ceasefire between the United States and Iran in June eased fears of prolonged supply disruptions and stabilized oil prices. The rebound encouraged companies to revive fundraising plans that had been postponed during the earlier bout of market volatility.

Analysts estimate that companies could raise as much as $50 billion through Indian stock offerings this year, making 2026 another potentially record-breaking year for the country’s capital markets if geopolitical risks remain contained.

Against that backdrop, SBI Fund Management’s IPO has become an important gauge of investor appetite. Strong demand suggests domestic institutions remain willing to deploy capital into high-quality businesses despite broader market uncertainty.

The company enters the public market from a position of considerable strength. As of March 2026, SBI Fund Management oversaw 29.5 trillion rupees ($395 billion) in assets under management, making it India’s largest asset manager. Its scale is supported by the extensive distribution network of State Bank of India, the country’s largest lender, providing access to millions of retail investors across metropolitan areas and rapidly growing smaller cities.

India’s mutual fund industry has also benefited from structural changes in household savings patterns. Rising financial literacy, growing participation through systematic investment plans (SIPs), digital investment platforms, and a steady migration away from physical assets such as gold and real estate have driven consistent inflows into equity funds. Monthly SIP contributions have remained near record highs, providing asset managers with a stable and recurring source of assets under management.

The company is also well positioned to benefit from the broadening of India’s investment base beyond major urban centers. Smaller cities have become an important driver of mutual fund growth, aided by expanding banking infrastructure, mobile investing platforms and higher disposable incomes.

Investors will closely monitor SBI Fund Management’s stock market debut next week. A strong post-listing performance would likely reinforce confidence ahead of much larger offerings from NSE, Jio Platforms and other high-profile issuers, while potentially setting the tone for India’s IPO market through the remainder of 2026.