KUALA LUMPUR, MALAYSIA – SEPTEMBER 19: Customers line up outside the Apple Store ahead of the iPhone 17 series launch at Tun Razak Exchange (TRX) on September 19, 2025 in Kuala Lumpur, Malaysia. The iPhone 17 line represents the next generation of iPhones and accessories coming to international markets. (Photo by Anise Lin/Getty Images)
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Analysts expect the global smartphone market to see its worst decline on record in 2026 as device prices continue to rise due to reduced memory supply.
According to a report by the International Data Corporation, the worsening memory crisis could cause the global PC and smartphone markets to contract by 11% and 13%, respectively.
Meanwhile, Counterpoint Research predicts that global smartphone shipments in 2026 will decline 12% year-on-year, the “biggest drop on record,” and this year’s smartphone shipments are expected to fall to the lowest annual shipments since 2013.
The warning comes as manufacturers in other memory-intensive sectors, including smartphone and PC makers, scramble to secure chip supplies as technology companies looking to cash in on the AI boom by aggressively investing in AI infrastructure are tightening memory chip inventories.
“Many of these memory companies are asking smartphone vendors to line up behind the hyperscalers, which means that the allocation[to smartphone vendors]will be prioritized over other segments of the industry, in this case AI,” Tarun Pathak, research director for devices and ecosystems at Counterpoint, told CNBC.
The chip shortage is already driving up prices for components such as rapid-access memory (RAM) cards needed for both consumer electronics and the large data center complexes favored by AI hyperscalers. Amazon and Meta We are rushing to invest in.
Brian Marr, vice president of device research at IDC, said this redistribution of chip supply has been impacting device makers for years, but previous predictions of the impact of AI-powered demand consistently underestimated the severity of the shortage.
“The situation has deteriorated dramatically in the past few months,” Ma said. “In fact, we made a prediction in November…but in the weeks immediately after we published that prediction, things got worse and worse.”
IDC originally expected global PC and smartphone markets to grow by about 8.3% and 2%, respectively, this year, but adjusted its forecasts to reflect the worsening outlook for chip supply.
Similarly, Counterpoint sees a “structural recession” in the smartphone market as the chip shortage was more severe than expected, despite a 3.8% year-on-year increase in shipments in the fourth quarter of 2025.
structural changes
Both reports see deteriorating chip demand driving structural changes in the consumer electronics market.
Counterpoint’s Pathak said the chip shortage will likely cause manufacturers to pass the burden of reduced margins onto consumers, which will likely result in fewer new users and longer replacement cycles for existing users.
But other opportunities also exist, Pathak said, as the second-hand and second-hand smartphone market is expected to grow as an increasing proportion of consumers are priced out of rising memory prices.
Both reports predict that OEMs will always prioritize sales of mid-range to high-end models, and that some manufacturers may exit the low-end market altogether.
Ma said memory costs account for a much larger portion of the price of low-end models, making it “difficult for vendors to maintain profitability while keeping prices down.”
Large companies are likely to be better equipped to withstand short-term chip supply uncertainty. apple and samsung According to the Counterpoint report, these companies are experiencing “more integrated supply chains, increased pricing power, and continued premiumization.”
“This is a scale game… if you look at the vendors that tend to have a relative advantage, it’s the larger companies,” Ma said.
But beyond economic scale, ostensibly high-end manufacturers’ models look like this: apple And Samsung also commands a large share of the second-hand market, because such models have more “aspirational power,” Pathak said.
The forecast suggests that the near-term outlook for the consumer device market is bleak, with the earliest inflection point expected to be in the second half of 2027 when “additional memory capacity comes online,” Counterpoint said.
IDC is looking at opportunities from increased memory capacity expansion and a possible influx of smaller memory suppliers from China looking for signs of relief. Other than that, Ma said, the company sees little reassurance in the short term.
But Pathak remains optimistic. “The smartphone market has always been resilient, and over time people will need a phone.”
