Smartphone Industry Braces for Record Annual Decline as Memory Chip Shortages Deepen

The planetary smartphone marketplace is connected way for its largest yearly diminution ever recorded, with instrumentality shipments expected to autumn 13.9% successful 2026 to astir 1.08 cardinal units, according to caller projections released by Counterpoint Research.

The latest forecast represents a deterioration from the firm’s February estimate, which had anticipated a 12.4% yearly decline. Analysts property the worsening outlook mostly to escalating shortages of representation chips, a concern that has been further analyzable by disruptions linked to the struggle involving Iran.

Lower-Cost Smartphones Face the Greatest Pressure

The effects of the proviso crunch are proving peculiarly terrible successful the entry-level and mid-range smartphone categories.

As semiconductor manufacturers prioritize accumulation of chips destined for artificial quality applications, less components are being allocated to lower-priced mobile devices. This displacement has made fund smartphones progressively hard and little profitable to manufacture.

Counterpoint reported that mean wholesale smartphone prices accrued 14% during the archetypal quarter, portion wide shipments declined 3.1% from a twelvemonth earlier.

The probe steadfast expects pricing pressures to intensify arsenic inventories accumulated earlier the proviso disruption are gradually exhausted. As a result, definite smartphone models priced beneath $150 whitethorn yet vanish from the market.

“Smartphone makers successful the debased and mid-tier are caught betwixt outgo increases they cannot sorb and consumers with constricted spending power,” said Wang Yang, a main expert astatine Counterpoint, an autarkic probe institution that publishes quarterly smartphone shipment data.

“The question is nary longer however to turn shipments oregon marketplace share, but whether to stay successful the marketplace astatine all.”

Industry Faces Unprecedented Supply Challenges

According to Wang, the existent representation spot shortage represents the astir important supply-side situation the smartphone assemblage has experienced to date.

He noted that manufacturers person constricted options for mitigating the impact, arsenic higher costs cannot easy beryllium offset done terms increases oregon large merchandise redesigns.

The shortage is placing sizeable unit connected profitability crossed the industry, peculiarly among companies focused connected value-oriented devices.

Premium Smartphone Segment Shows Greater Stability

While the little extremity of the marketplace is struggling, premium smartphone manufacturers person demonstrated greater resilience.

Apple (NASDAQ:AAPL) reported grounds gross during the archetypal quarter, supported by beardown request from customers upgrading to the iPhone 17 lineup.