Smartphone market poised for ‘record sharp decline’ in 2026

Analysts are predicting the worst decline in the global smartphone market in 2026, as dwindling memory supplies continue to drive up device prices.

A worsening memory crisis could cause the global PC and smartphone markets to shrink by 11% and 13%, respectively, according to a report by International Data Corporation.

Meanwhile, Counterpoint Research is projecting a 12% year-over-year decline in global smartphone shipments in 2026 — the “sharpest decline on record,” with smartphone shipments expected to fall to their lowest annual volumes since 2013 this year.

The warnings come as technology companies looking to cash in on the AI ​​boom through aggressive investments in AI infrastructure are reducing memory chip inventories, as manufacturers in other memory-intensive sectors such as smartphone and PC makers scramble to secure chip supplies.

“A lot of these memory companies are asking smartphone vendors to line up behind hyperscalers, which means allocation is prioritized over other segments (for smartphone vendors) in the industry — in this case AI,” Counterpoint’s research director of devices and ecosystems Tarun Pathak told CNBC.

Chip shortages have already driven up prices for components such as rapid access memory (RAM) cards, which are essential for the large data center complexes favored by consumer electronics and AI hyperscalers. Amazon And Meta Rushing to invest.

This reallocation of chip supplies has affected device makers for years, with previous forecasts on the effects of AI-fueled demand consistently underestimating the severity of the shortage, said Brian Ma, vice president of devices research at IDC.

“It has worsened dramatically in the last few months,” Ma said. “We actually made a forecast in November … but in the following weeks, after we published that forecast, it just got worse and worse.”

IDC initially expected growth of 8.3% and 2% in the global PC and smartphone markets this year, respectively, but adjusted their forecast to reflect a worsening outlook for chip supplies.

Likewise, Counterpoint sees a “structural decline” in the smartphone market, with shipments growing 3.8% year-over-year in the fourth quarter of 2025, but the severity of the chip shortage has exceeded expectations.

Both reports look at the worsening chip crunch causing structural changes in the consumer electronics market.

According to Counterpoint’s Pathak, the chip shortage will force manufacturers to pass on the burden of their shrinking margins to consumers, which will mean fewer new users and longer replacement cycles for existing users.

However, other opportunities exist, Pathak said, as the secondary and used smartphone market is increasingly priced out of rising memory prices by increasing consumer share.

Both reports expect OEMs to uniformly prioritize sales of mid- to high-end models, with some manufacturers likely to exit the low-end market altogether.

Memory costs make up a significantly larger share of the prices of low-end models, which makes it “difficult for vendors to be profitable while keeping prices down,” Ma said.

As companies like it, big players are better prepared to tolerate near-term uncertainty in chip supplies. Apple And Samsung According to Counterpoint’s report, they have “strong supply chain integration, high pricing power and continued premiumisation”.

“It’s a game of scale… when you look at the vendors that have a relative advantage, it’s the big guys,” Ma said.

But beyond economy scales, models from seemingly high-end manufacturers are appealing Apple And Samsung has a bigger share of the used market as well, Pathak said, because such models have more “aspirational pull”.

Counterpoint said, “with an early inflection point expected in late 2027, additional memory capacity (should) come online” poses a gloomy outlook for the consumer devices market in the near term.

IDC is looking at opportunities from increasing memory capacity buildouts and potential influx of smaller memory suppliers from China for signs of relief. Apart from that, according to Ma, the firm sees little promise in the near term.

Pathak, however, remains optimistic. “The smartphone market has always been resilient … Ultimately, people need a phone.”