Counterpoint Research (CPR) has revised its outlook for the global smartphone industry, projecting shipments to fall by 13.9 per cent this year to 1.08 billion units.
The sharpest annual decline on record. The figure represents a downgrade from CPR’s earlier February forecast of a 12.4 per cent drop. The shortage of memory chips is the cause. The downturn is being driven by a severe shortage of Dynamic Random Access Memory (DRAM) chips, a critical component in smartphones.
Manufacturers are increasingly diverting production capacity toward artificial intelligence (AI) semiconductors, reducing availability for entry-level handsets. This shortage is hitting the lower end of the market hardest, making devices priced below US$150 less profitable to manufacture. Analysts warn that some of these models could disappear entirely.
Impact on the Market
While shipments decreased by 3.1% in the first quarter of 2026 compared to the same period the previous year, wholesale smartphone prices increased by 14%. CPR expects this trend to continue as inventories built before the supply crunch are gradually exhausted.
Wang Yang, Principal Analyst at Counterpoint Research, explained
“Manufacturers operating in the low and mid-range segments are being squeezed by rising production costs that they cannot easily pass on to consumers, many of whom have limited spending power. The challenge is no longer about increasing shipments or expanding market share. For some companies, it is about determining whether they can continue operating in the market at all.”
Wang described the memory chip shortage as the most serious supply-side disruption the smartphone sector has ever experienced
Winners and Losers
Apple Inc.: Reported record revenue in Q1, supported by strong demand for the iPhone 17 range. Shipments are expected to remain stable in 2026 before growing by 5 per cent in 2027. Apple benefits from stable chip supply and stronger profit margins.
Samsung Electronics Co. Ltd.: Maintained stable shipment volumes in Q1 and is projected to record only a modest 4 per cent decline for the year. Secure component supplies and a consistent product portfolio underpin its resilience. Transsion Holdings: Faces the steepest decline, with shipments forecast to drop by 32 percent. The company relies heavily on smartphones priced below US$150.
Xiaomi Corp.: Shipments projected to fall by 28 per cent. Honor Device Co. Ltd.: Expected to see a 20 per cent decline. Principal issues.
It is essential to understand this report because smartphones are the foundation of digital economies, not just consumer devices. A global decline in shipments affects:
- Consumers: Fewer affordable models, rising prices, and limited choice.
- Manufacturers: Pressure to adapt business models or exit markets.
- Investors: Shifts in market share toward premium players like Apple and Samsung.
- Policy Makers: Need to address supply chain vulnerabilities that ripple across industries.
As AI demand grows, traditional consumer electronics will face increasing competition for components. For consumers, this means paying attention not only to smartphone launches but also to the global semiconductor supply chain that makes them possible.
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