Walk into any busy market in Kampala, Lagos or Nairobi these days and you will hear the same talk among phone sellers. The really cheap smartphones that used to sell fast are getting harder to find at the old low prices. Buyers take longer to decide. Some leave without buying. The quiet reason behind this is the same technology everyone is excited about: artificial intelligence.
New figures from market research firm Omdia show what is happening across Africa. In the second quarter of 2026, smartphone shipments on the continent dropped 7 percent compared with the same time last year. That brought the total to about 17.8 million phones. It was the first drop in three years. The overall number looks bad, but the real story is worse.
Phones that cost less than UGX 365,000 fell by 34 percent. That means nearly three million fewer of those low-cost devices. At the same time, the average price of a smartphone in Africa rose by around UGX 150,000, reaching UGX 737,000.
This change matters more in Africa than in most other places. About 30 percent of all smartphones sold here still cost under UGX 365,000. In the Middle East that share is only 8 percent. In Latin America it is 5 percent. In Western Europe it is 2 percent, and in China it is about 1 percent. Africa relies heavily on these ultra-cheap phones. When they become scarce or more expensive, the effects spread far beyond just phone sales.
Why AI is driving up the cost of phones
The link to the AI boom is clear and direct. Companies are building huge data centres to power AI systems. Those centres need vast amounts of high-performance memory chips called DRAM and NAND.
Memory makers are shifting more of their production toward the special high-end chips that AI companies prefer because they bring higher profits. This leaves less supply for the regular memory that goes into smartphones, and prices for those chips have shot up.
Cheap phones feel this pressure the most. Parts already make up a big share of their final selling price, so there is little room to absorb extra costs. Omdia found that for phones under UGX 361,000, memory rose from about 33 percent of the total parts cost in late 2025 to around 64 percent by early 2026. For phones between UGX 365,000 and UGX 730,000, it climbed from 31 percent to 59 percent.
Phone makers now face tough choices. They can raise the price of the phone. They can cut the amount of memory or storage to keep the price down. They can take the hit on their own profits. Or they can make fewer of the cheapest models. The market is already moving toward higher prices and less focus on the very lowest end.
Why this is especially hard for Africa
In Europe a price rise of UGX 73,000 or UGX 146,000 is annoying. In many African countries it can stop a sale completely. Studies show that an entry-level smartphone can cost as much as 73 percent of the monthly income of a low-income adult in Sub-Saharan Africa.
Other figures put the average closer to 26 percent of monthly income across the region, and much higher for the poorest families. Either way, the numbers are tough. Many people can afford mobile data, but the phone itself is slipping further out of easy reach.
This is not just about games or social media. Smartphones open the door to mobile money, digital banking, small loans, buying and selling on WhatsApp, government services, job searches, online learning, farming tips, ride-hailing apps and, more and more, AI tools.
The mobile industry group GSMA says mobile services added about $240 billion to Africa’s economy in 2025. That is nearly 8 percent of the continent’s total economic output. They also stress that phones under UGX 365,000 are key for bringing more people into the digital world.
When those phones get more expensive, the wider benefits of connectivity are at risk.
The situation is especially important for Transsion, the company behind Tecno, Infinix and itel. These brands still lead the African market with about 47 percent share.
They succeeded by building phones that fit real African needs: big batteries that last all day, decent cameras, dual SIM slots for using two networks, strong sales networks that reach smaller towns, and prices that match tight budgets.
Now that the cheapest phones are harder to make profitably, Transsion and its rivals have to change their approach. Their shipments already fell about 14 percent in the latest quarter because they depend so much on the low-price segment. Samsung, by contrast, gained ground by focusing more on slightly higher-priced models.
Different countries are moving in different directions. Places with stronger incomes are shifting toward better phones and replacing them more often. Places with lower incomes stay very sensitive to even small price rises. This risks creating two speeds of digital progress across the continent.
Financing becomes the new battleground
There is another big change taking shape. If makers can no longer keep the actual phone price very low, the next fight is over how little a customer has to pay upfront. Those are two separate questions.
A phone that costs UGX 500,000 does not have to drop to UGX 300,000 if people can buy it with a small deposit, weekly payments, pay-as-you-go plans, loans from phone operators, or bundles that include data. Industry experts see the focus moving away from the lowest possible sticker price and toward better financing, wider distribution and lower cash needed on day one.
Companies that offer phone financing are likely to become more important, not less, if prices keep rising.
There is a strange twist in this story. The AI boom is building more data centres, improving online services and putting more useful tools on phones. At the same time, the cheapest way into the digital world is becoming more costly. The technology that promises to change lives may make it harder for some of the people who need it most to own the device that lets them take part.
What to watch in the coming months
Over the next six to twelve months several signs will show how this develops. Watch whether Tecno, Infinix and itel phones start costing noticeably more in shops. See if the cheapest models come with less memory or storage to hold prices steady.
Track how fast pay-as-you-go and operator financing schemes grow from companies like Airtel, MTN and Safaricom. Check whether the move from basic feature phones to smartphones slows down in poorer areas.
Keep an eye on any governments that cut taxes or import duties on phones, and whether second-hand and refurbished phones become more popular to fill the gap.
The AI boom has brought big leaps in computing power. But in the phone stalls of African cities and the roadside shops of smaller towns, its effects feel more everyday and more serious. Higher memory costs are changing what a basic smartphone costs, and that tests how many people can stay connected.
How the industry answers — through smarter financing, adjusted phone designs or helpful policies — will decide how many people keep crossing into the digital economy and how many find the door getting harder to open.
