Key Highlights
- Global smartphone shipments are expected to fall 2.1% next year, driven by rising memory chip and component costs, according to Counterpoint.
- Entry-level smartphones priced below $200 are most affected, with bill-of-materials costs rising 20%-30% since early 2025.
- Apple and Samsung are better positioned to withstand cost pressures, while Chinese brands face margin challenges.
Global smartphone shipments are expected to decline 2.1% in 2026, as escalating chip costs continue to pressure device makers and dampen consumer demand, according to technology-focused market research firm Counterpoint.
Electronics supply chains worldwide have been disrupted by a growing shortage of legacy memory chips, as manufacturers increasingly prioritize high-end memory components designed for artificial intelligence (AI) applications. This shift has tightened supply for lower-cost components traditionally used in mass-market smartphones.
The impact is being felt most sharply at the lower end of the market, where manufacturers operate on thin margins and have limited flexibility to absorb rising costs.
Entry-Level Smartphones Face the Greatest Pressure
According to Counterpoint Research Director MS Hwang, smartphones priced below $200 are bearing the brunt of the cost increases. Bill-of-materials expenses which include the total cost of components used in manufacturing have climbed 20% to 30% since the beginning of the year.
This surge is making it increasingly difficult for vendors to maintain competitive pricing without sacrificing profitability. As a result, manufacturers may be forced to either raise prices or scale back production volumes, both of which could further weaken demand in price-sensitive markets.
Chinese Brands More Vulnerable as Premium Players Hold Ground
Counterpoint noted that Chinese smartphone brands, including Honor Device and Oppo, are expected to be more exposed to these pressures, particularly in the entry-level segment. Tight margins leave little room to absorb higher component costs, increasing the risk of shipment declines.
In contrast, Apple and Samsung are seen as better positioned to weather the next few quarters. Their strong brand equity, premium pricing power, and diversified supply chains provide greater resilience against cost inflation.
AI Server Demand Intensifies Memory Chip Competition
The report also highlighted broader industry challenges tied to AI-driven infrastructure demand. Counterpoint previously warned that Nvidia’s move to adopt smartphone-style memory chips for AI servers could significantly strain supply.
Because AI servers require substantially more memory than smartphones, the shift is expected to create sudden demand spikes that the industry is not prepared to meet. As a result, server-memory prices could double by late 2026, further exacerbating cost pressures across the electronics sector.
Research firm IDC recently projected a 0.9% decline in global smartphone shipments in 2026, also citing rising memory chip prices as a key factor.