Higher component costs are threatening to slow the rapid expansion of India’s entry-level 5G smartphone market, raising concerns about affordability and subscriber growth, industry executives and analysts said, according to a report by The Economic Times dated November 25, 2025.
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Memory Prices Surge, Eating into Margins
Rising memory prices have emerged as the biggest pressure point, with memory now expected to account for as much as 48 percent of total component costs, up from 20–35 percent earlier. The surge follows a global shift in production toward high-bandwidth memory used in AI data centres. Most smartphone brands have already increased prices of budget 5G models by Rs 1,000–2,000 to offset the higher costs.
Manufacturers Scale Back Production
"Top handset manufacturers are looking to either reduce their footprint in the segment or exit altogether as higher costs of components used in entry-level smartphones are eroding gross margins," unnamed Industry executives were quoted as saying in the report.
Entry-Level 5G Market Growth Faces Headwinds
Shrinking margins have prompted several top handset makers to scale back their presence in the sub-Rs 10,000 5G segment, while some are considering exiting the category altogether. Original design manufacturers Huaqin and Longcheer—key suppliers for major Android brands—have cut production in India by 30–40 percent, citing both post-festive season demand correction and rising component costs.
"Huaqin and Longcheer, which supply entry-level handsets to top Android brands, have sharply reduced their supplies from October, which is partly due to the festive season coming to an end, but also due to higher component costs which cannot justify such low end-prices," an executive was quoted as saying.
Future Cost Trends and DRAM Price Hikes
Entry-level 5G devices priced below Rs 10,000 had risen sharply to capture 35 percent of shipments in their segment in Q3 2025, compared with just 2 percent a year earlier, according to Counterpoint Research, the report added. The segment expanded more than fourteenfold over the past year, buoyed by wider availability of affordable 5G chipsets and aggressive pushes from telecom operators. However, analysts warn that this momentum may taper off in 2026 if pricing pressures persist.
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Component industry tracker TrendForce expects contract prices for DRAM modules to jump more than 75 percent year-on-year in the December quarter.
"TrendForce forecasts that overall BOM (bill of material) costs will grow by an additional 5-7 percent-or even more-compared to 2025. For low-end models, where profit margins are thin, brands probably will cut their production share and increase prices across different product tiers to maintain profitability," the firm said, according to the report.
Affordability Remains Key to 5G Adoption
A senior telecom executive said affordability remains critical for driving 5G adoption in India, where device prices directly influence consumption volumes. Operators may deploy financing schemes to cushion the impact of rising handset prices, though average selling prices have trended upward consistently over the past six to seven years without dampening demand.
"The more affordable the handset is in India, the higher the consumption volumes and subscriber volumes will go. That's how the market has been structured here," a telecom sector executive told ET. "If there are an increasing number of smartphones coming at sub-Rs 10,000 or sub-Rs 5,000, it will help a large population wanting to get onto the 5G platform."
He also noted that telcos take several actions, such as using easy financing to drive the market when handset prices rise. "The last 6-7 years, the average selling prices for all devices have been going up, and yet the demand doesn't seem to go down," he said.
Meanwhile, handset brands continue to grapple with both elevated component costs and tightening supplies, particularly of memory modules.
