GSMA warns rising handset costs could widen AI divide

GSMA has warned that rising smartphone component costs are increasing the risk of a global AI divide, while billions of people remain offline despite living within mobile broadband coverage.

The warning accompanied publication of its State of Mobile Internet Connectivity report, which found that more than 3.4 billion people do not use mobile internet. More than 90% of them already live in areas covered by mobile broadband networks.

The report paints a picture of slowing mobile internet adoption as governments and companies put greater emphasis on AI-based services. It found that 4.8 billion people now use mobile internet on their own device, but the number of new users added last year fell to about 160 million from 190 million a year earlier.

A central concern is the cost of basic smartphones in lower-income markets. The majority of people in the so-called usage gap, estimated at 3.1 billion, still do not own an internet-enabled device.

Handset affordability was the biggest barrier to mobile internet adoption across surveyed low- and middle-income countries, ahead of digital skills. By the end of last year, an entry-level internet-enabled handset cost the poorest 20% of people in those countries the equivalent of 44% of average monthly income, rising to 76% in Sub-Saharan Africa.

Component pressure

GSMA linked pressure on handset prices to a sharp increase in the cost of memory and chipsets, driven by global demand for AI infrastructure and data centres. According to figures it cited from Counterpoint Research, memory prices more than doubled between the third quarter of 2025 and the first quarter of 2026, then rose by a further 80% to 90% in the second quarter of 2026.

Those increases are already feeding through to entry-level device prices. The report said global smartphone shipments are forecast to record their largest annual decline, driven mainly by the collapse of the sub-USD $100 handset segment, with emerging markets expected to suffer most.

GSMA argued this could deepen the split between people who can afford to participate in a digital economy increasingly shaped by AI services and those who cannot. The risk is especially acute in low- and middle-income countries where connectivity exists but device ownership remains out of reach for many households.

Its analysis found that, until about a year ago, cutting the price of entry-level smartphones to USD $30 could have made them affordable for almost 1.6 billion people. A USD $20 price point could have put them within reach of about 2.2 billion people already living within mobile broadband coverage. Those targets are now out of reach as memory prices keep rising, the report said.

Call for action

The organisation is calling on chipset and memory manufacturers to increase the availability of cheaper components for entry-level handsets. It also wants broader talks across the mobile sector, policymakers and multilateral financial institutions on production, distribution, taxation and device reuse.

Vivek Badrinath, Director General of GSMA, said: "Artificial intelligence has the potential to improve lives on an unprecedented scale, but AI is meaningless if people cannot get online in the first place. The greatest risk is not simply an AI divide between countries, but between people who can afford to participate in the digital economy and those who cannot.

"Unless we protect the affordability of entry-level smartphones, billions of people risk being excluded from the next generation of digital services before they have even had the opportunity to experience the internet. The current memory price increases make this a clear and present danger.

"Preventing that outcome requires coordinated action from policymakers, mobile operators, device manufacturers and component suppliers alike. We call upon all parties to mobilise all possible tools, both on the production side and on the distribution and taxation areas, and to take measures to ease reuse of devices."

Economic stakes

The report framed the issue as an economic one as well as a social one. Previous GSMA analysis estimated that closing the mobile usage gap would generate USD $3.5 trillion in additional GDP between 2023 and 2030, with more than 90% of the gains going to low- and middle-income countries.

Beyond handset prices, the report pointed to low literacy, limited digital skills, safety and security concerns, and a lack of relevant content and services as continuing obstacles to wider internet use. Still, it warned that the immediate rise in device costs threatens to reverse years of progress in narrowing the mobile usage gap.

That matters as public and private investment shifts towards AI-based healthcare, education, finance and government services. For people without an affordable smartphone, access to those services may remain theoretical even where the network is already in place.