The global smartphone market is heading for its sharpest annual decline on record as soaring chip and memory costs push up handset prices and force manufacturers to cut lower-margin models and configurations, analysts say
Shipments are forecast to drop by more than 14 per cent year-on-year to about 1.07 billion units in 2026, mainly due to soaring component costs, consultancy Counterpoint Research said in a report.
That figure is substantially below the 1.2 billion shipped in 2023, which at the time was the lowest in almost a decade, spurred by economic uncertainty and high inflation that hit consumer sentiment.
Shipments rose 4 per cent to 1.21 billion in 2024, and 3 per cent to 1.25 billion in 2025.
The main culprit for the expected decrease this year β which is making that sentiment worse β is the cost of chipsets and memory units, Hong Kong-based Counterpoint said.
Chip prices have soared due to high demand driven by data centres, amid the artificial intelligence boom. This, in turn, has been passed along the supply chain.
As consumers are balking at higher costs, imminent further increases in the prices of new phones, especially flagships, would limit options for buyers, Hong Kong-based Counterpoint said.
The pressure from higher manufacturing costs points to a pattern that could linger in the longer term, Counterpoint principal analyst Yang Wang said.
βThe 2026 decline reflects more than temporarily weak demand. Higher component costs are pushing manufacturers to remove products and configurations that are no longer economically viable, particularly at lower price points," he said.
Apple raised the prices of some of its Macs and iPads in June, and is widely expected to do the same for its next iPhones, expected to be revealed next month. Google, Motorola, Nothing and OnePlus, as well as mid-tier majors Oppo, Realme, Vivo and Xiaomi, have also announced increases.
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Samsung's Galaxy Z Fold8 and Galaxy Z Fold8 Ultra feature slimmer foldable designs, larger displays and upgraded camera systems as the company expands its latest generation of foldable phones. Chris Whiteoak / The National -
Apple's iPhone 17 Pro Max features the company's latest A-series chip, an upgraded camera system and a redesigned aluminium enclosure. Victor Besa / The National -
Apple's iPhone 17 Air, the thinnest model in the iPhone 17 line-up, features a lightweight design and a large display. Victor Besa / The National -
China-based OnePlus, a subsidiary of Oppo, has expanded its smartphone range with the OnePlus 15 and 15R, with the latter featuring a 165Hz display and 50-megapixel main camera. Photo: OnePlus -
Oppo's Find X9 features a Hasselblad-branded camera system, with the handset designed around photography and imaging capabilities. AFP
"The common thread is higher memory and storage costs, alongside tariffs, currencies and increasingly sophisticated components, which suggests that price hikes could continue over the next few product cycles," Charu Chanana, chief investment strategist of Denmark's Saxo Bank, told The National.
"However, this will not be uniform inflation across every device. Premium manufacturers with strong brands can pass on more of the cost. Mass-market producers may instead reduce storage, delay launches or accept weaker margins because their customers are more price-sensitive."
Samsung Electronics, the world's biggest mobile phone maker, raised the prices of its new-generation Galaxy Z foldables. That Apple and Samsung, the smartphone industry's top players which have robust supply chains, were forced to increase prices shows the extent of manufacturing pressures.
A regional Samsung executive acknowledged the challenges to The National, but stressed that the company is working with operators and retailers to provide flexible payment plans for its devices. Apple does not comment on market speculation.
But Seoul-based Samsung is on pace to reclaim the lead in smartphone shipments this year, with its share pegged to rise 0.8 per cent to 22.6 per cent, Counterpoint said. That would edge out Apple, which finished 2025 on top, by a very slim 0.1 per cent.
The top six Chinese mobile phone makers - Huawei Technologies, its former unit Honor, Oppo Group, Transsion Group, Vivo and Xiaomi - are forecast to comprise 45.4 per cent of the market this year. Oppo's other brands include OnePlus and Realme, while Transsion has Infinix, Itel and Tecno in its fold.
Counterpoint expects Samsung to "significantly" outperform the broader market, owing to its wide geographic reach and supply chain depth. The company is also one of the world's top chip makers, which gives it more reliable access to memory and semiconductor supplies. Samsung kept its lead in Middle East smartphone shipments in the second quarter, Omdia said in a report last week.
These factors give Samsung "more flexibility to secure supply, redirect products between markets and maintain availability", Mr Wang said.
"Samsung may accept some pressure on profitability to capture volume share, but that trade-off should still leave it better positioned than most competitors during the downturn."
Counterpoint expects the smartphone market to remain under pressure in 2027 before rebounding more strongly in 2028; it is unclear when chip prices will go down, as AI demand is expected to remain elevated for the foreseeable future.
"Affordability will recover more slowly because higher-cost inventory must first move through the channel," Mr Wang said.
