Smartphone market poised for ‘sharpest decline on record’ in 2026
KUALA LUMPUR, MALAYSIA – SEPTEMBER 19: Customers line up outside an Apple store ahead of the launch of the iPhone 17 series at Tun Razak Exchange (TRX) on September 19, 2025 in Kuala Lumpur, Malaysia. The iPhone 17 series represents the next generation of iPhones and accessories that will hit international markets. (Photo: Annice Lyn/Getty Images)
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Analysts are predicting the worst-ever decline in the global smartphone market in 2026 as dwindling memory supplies continue to drive up device prices.
The worsening memory crisis could cause the global PC and smartphone markets to shrink by 11% and 13% respectively, according to a report. report From International Data Corporation.
Meanwhile, Counterpoint Research predicts a 12% annual decline in global smartphone shipments in 2026; this is the “shargest decline on record”; This year, smartphone shipments are expected to fall to their lowest annual volumes since 2013.
The warnings come as technology companies seeking to cash in on the AI boom by aggressively investing in AI infrastructure are straining memory chip stocks, leaving manufacturers in memory-intensive industries such as smartphone and computer makers scrambling to secure chip supplies.
“Many of these memory companies are asking smartphone vendors to line up behind hyperscalers, which means allocation [to smartphone vendors] It’s not prioritized over other segments in the industry (in this case, artificial intelligence), Tarun Pathak, Counterpoint’s research director for devices and ecosystems, told CNBC.
Chip shortages have already led to increases in prices of components such as fast-access memory (RAM) cards, which are essential for large data center complexes beloved by both consumer electronics and AI hyperscalers. Amazon And Meta They are rushing to invest.
While the reallocation of chip supplies has affected device makers for years, previous estimates of the effects of AI-driven demand have consistently underestimated the severity of the shortage, according to Bryan Ma, IDC’s vice president of device research.
“The situation has worsened dramatically in the past few months,” Ma said. “We actually made a forecast in November… but in the weeks that followed, right after we issued that forecast, the situation got worse.”
IDC had initially expected growth in the global PC and smartphone markets around 8.3% and 2% respectively this year, but adjusted its forecasts to reflect the worsening outlook for chip supply.
Similarly, Counterpoint predicts a “structural downturn” in the smartphone market, even though shipments rose 3.8% year-on-year in the fourth quarter of 2025 as the severity of the chip shortage exceeded expectations.
Structural changes
Both reports show that the worsening chip crisis is leading to structural changes in the consumer electronics market.
Chip shortages will likely force manufacturers to pass the burden of their shrinking margins on to consumers, likely meaning fewer new users and longer replacement cycles for existing users, Counterpoint’s Pathak said.
However, Pathak said the secondary and used smartphone market looks set to grow as the share of consumers priced out increases due to rising memory prices, and said other opportunities are also available.
Both reports expect OEMs to always prioritize sales of mid- and high-end models, with some manufacturers likely to exit the lower-end market altogether.
Memory costs make up a significantly larger portion of the prices of lower-end models, making it “harder for vendors to remain profitable while keeping prices low,” Ma said.
Larger players will also likely be better prepared to withstand short-term uncertainty in chip supply, as companies want. Apple And SAMSUNG According to Counterpoint’s report, they have “stronger supply chain integration, higher pricing power and continued premiumization.”
“This is a game of scale… When you look at the sellers with a relative advantage, they are the bigger guys,” Ma said.
But beyond economy scales, models from seemingly high-end manufacturers Apple Pathak said Samsung has a larger share even in the second-hand market because such models have “aspirational appeal”.
Forecasts reveal a bleak near-term outlook for the consumer devices market; The earliest milestone is expected to be in late 2027; “additional memory capacity” should increase [come] online,” Counterpoint said.
IDC is monitoring opportunities from increased memory capacity increases and a potential influx of smaller memory suppliers from China for signs of relief. Other than that, the company sees little assurance in the near term, according to Ma.
But Pathak remains optimistic. “The smartphone market has always been resilient… eventually people will need a phone.”
