Diwali season is when India upgrades. Discounts pile up, exchange offers multiply, and a new phone feels like a festival purchase. This year, the shelves are emptier than they have been in a decade.
Smartphone shipments in India fell 26% in the July to September 2026 quarter, to 35.8 million units. That is the lowest third-quarter figure since 2016. Shipments count phones delivered to retailers, not phones bought by customers. So the fall tells you something sharper: companies themselves expect weaker demand and are sending fewer phones to market.
The standard explanation is price. Wars in Europe and West Asia have disrupted shipping routes, pushed up oil prices, and made transport costlier. All of that adds to the cost of making and selling a phone. But it is the smaller part of the story.
The larger cause sits inside the device. Every smartphone needs memory chips to store photos, run apps, and handle daily tasks. Those chips have become expensive because of the AI boom. AI systems need enormous amounts of memory, so demand for memory chips has climbed. Phone makers now compete with AI companies for the same chips. And the AI companies spend far more money, so chipmakers serve them first.
That leaves phone makers short of chips and facing a choice: absorb the extra cost or pass it on. Why would a company eat a loss when the customer can be made to pay it?
The biggest factor pushing prices up is artificial intelligence.
Phone makers did not hesitate. They handed the cost to the customer, and handsets got dearer. A technology sold as a convenience is now taxing the people who never asked for it.
Buyers did not vanish. They changed what they buy. Some are keeping old phones. Some are moving to cheaper models. Others are hunting for deals. That shift rewarded brands with affordable ranges.
Samsung took back first place in India, shipping 6.7 million phones. Its Galaxy A series starts at $105, and cashback, exchange offers, and easy payment plans backed it up. Vivo slid to second, with shipments down 34%, after it struggled to match Samsung's supply of budget phones. Oppo and Xiaomi also fell sharply. Both raised prices by 20% in the last quarter, which hollowed out their value-for-money pitch. Apple finished last on the list, shipping only 3.9 million phones.
If your old phone still works, why spend more on a new one?
For years, a new phone in India signalled status. People wanted the latest model less for its features than for what it said about them. Price is now forcing a different calculation, and the cost lands on salaried families and first-time buyers who count every rupee. A phone that once looked like an achievement now looks like an expense.
Whether this is a pause or a permanent shift will decide which brands survive. The companies that win will be the ones building phones people actually want at prices they can afford. The rest will keep shipping into a market that has learned to wait.