Smartphone Market Faces Significant Downturn Amid Memory Chip Crisis
According to research firm IDC, the global smartphone market is projected to contract by 12.9 percent in 2026, primarily due to an unparalleled shortage of memory chips. This situation is described as “a crisis like no other,” fundamentally disrupting the electronics sector.
This revised forecast starkly contrasts with previous estimates, shedding light on the ongoing memory shortage that is reverberating through various segments of the electronics industry.
A substantial demand for sophisticated memory to support artificial intelligence applications has sharply diminished global supply, a predicament projected to persist into next year. This jeopardizes the existing business models of numerous smartphone manufacturers.
IDC anticipates around 1.1 billion mobile shipments in 2026, down from 1.26 billion in the preceding year, effectively erasing years of incremental growth.
With elevated component costs at play, smartphone manufacturers are recalibrating their strategies, scaling back specifications, eliminating less profitable entry-level models, and steering consumers towards higher-end devices.
“The tariffs and pandemic crisis seem insignificant compared to this,” remarked Nabila Popal, Senior Research Director at IDC.
“A seismic shift awaits the smartphone market upon the resolution of this crisis, altering its size, average selling prices, and competitive dynamics. Relief is not anticipated until at least mid-2027.”
Similarly grim projections were issued by another research entity, Counterpoint, which predicts a 12.4 percent decline in smartphone sales this year, attributing it to a “full-scale supply shock” concerning memory chips.
“2026 is poised to be the most challenging year in smartphone history,” asserted Counterpoint analyst Yang Wang. “Such a steep decline has never been witnessed in the industry.”
The soaring expense of memory chips—including DRAM, crucial for processing tasks, and NAND, essential for storage—has exacerbated already strained profit margins for numerous Android device manufacturers.
Companies like Xiaomi Corp and Oppo are locked in an intense rivalry to capture consumer attention, investing significantly in premium components to enhance their market share both domestically and internationally.
Their entry-level products bear the brunt of these cost surges, given that memory constitutes a substantial proportion of their overall material expenses, as noted by IDC.
“We simply wish there was more memory available,” commented Cristiano Amon, CEO of Qualcomm Inc., the primary supplier of mobile processors, during a recent earnings call.
“The challenge lies not merely in pricing but also in the availability. Ultimately, memory supply will dictate the overall dimensions of the handset market.”
The memory deficit is expected to extend into 2027, and when production meets demand again, reverting to previous pricing structures now appears improbable.
“The era of affordable smartphones is over; even post-crisis, we do not foresee memory prices returning to 2025 levels,” Popal emphasized. Last year, approximately 170 million smartphones were shipped below the $100 threshold—a category IDC now deems impractical to sustain.
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