Smartphone sales could be in for their biggest drop ever
Summary
The International Data Corporation (IDC) warns of a potential record decline in smartphone shipments by 12.9% in 2026 due to a RAM shortage from AI demands, while average smartphone prices are expected to rise to a historic $523.
Key Insights
Why is there a memory chip shortage affecting smartphones in 2026?
The shortage stems from artificial intelligence companies purchasing massive quantities of high-bandwidth memory (HBM) for data center servers, which has drained global memory supply. Memory manufacturers are prioritizing HBM production for AI applications over the DRAM and NAND memory used in consumer smartphones, creating severe supply constraints that have driven memory prices to unprecedented levels.
If smartphone sales are declining, why are prices rising to record levels?
Smartphone manufacturers are raising average selling prices (ASP) to $523—a historic high—because memory costs now represent 15-20% of production costs for mid-range devices and 10-15% for flagship phones. Rather than absorb these elevated component costs, manufacturers are eliminating unprofitable entry-level models, cutting specifications, and pushing consumers toward premium devices. This strategy maintains profitability despite lower overall shipment volumes, fundamentally reshaping the market away from affordable smartphones.