AI Shranks PC Market and Threatens Cheap Smartphones
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AI just shrank the PC market and is killing the cheap phone. Your gadgets are next
The global PC market shrank for the first time in two years, and the cheapest smartphones are vanishing fast. Both come down to one thing: AI’s hunger for memory chips is draining supply and pushing up the price of nearly everything you buy.
July 9, 2026 – 5:51 pm
Image by: Blake Patterson
For the first time in two years, the world bought fewer PCs. Global shipments of desktops, notebooks, and workstations fell 3.6% in the second quarter of 2026, to 65.7 million units, according to the analyst firm Omdia. The cause is not weak demand. It is the price of memory, and the reason it is soaring leads straight back to AI.
The AI boom has a voracious appetite for memory chips. Data centres are buying up DRAM and NAND to feed their servers, and that has drained supply for everything else. Prices have jumped, and device makers are passing the cost on. The gadgets in your pocket and on your desk are the collateral damage.
Desktops held up better, slipping 1.3% to 13.9 million units. Notebooks took the hit, down 4.2% to 51.7 million. Across comparable models, Omdia says prices have risen by roughly 20% to 40% against a year ago.
Oddly, sales did not crater. Many buyers simply moved fast. Facing warnings of further rises, shoppers and IT departments brought their purchases forward to beat the next hike. That props up the numbers now, but it borrows from the future. More than half of the business resellers Omdia polled in June said customers are delaying hardware refreshes until prices settle.
Winners and losers
The pain was not shared evenly. Lenovo kept the top spot with 16.6 million units and a 25% share, down a modest 2.1%. HP fell hardest of the leaders, down 9%, while Dell slipped 4.9%.
One name went the other way. Apple grew shipments 15.9%, to 7.3 million units, and added two points of market share. The lift came from its new MacBook Neo, and it came despite price rises, not instead of them. Apple raised MacBook prices this year, some models by up to $300, and buyers still came. Asus rounded out the top five, roughly flat.
The cheap phone is the real casualty
PCs are only half the story. The bigger blow is landing on the cheapest smartphones. Omdia expects global shipments of phones priced under $400 to fall more than 22% this year.
The maths is brutal at the low end. In the first quarter, memory alone made up nearly 60% of the bill of materials for a sub-$400 phone, and more than 64% for phones under $99. A premium maker can swap in an older chip or a cheaper screen to absorb the cost. A budget maker has already cut everything it can. So brands like Transsion, OPPO, vivo, Honor, and Xiaomi are raising prices or quietly retreating from the bottom of the market. As TNW has reported, AI is killing the cheap smartphone.
Pricier phones are faring better. Omdia expects shipments above $400 to grow 5.7% this year, even as the overall phone market shrinks.