Global smartphone shipments are heading for their steepest annual contraction on record. Counterpoint Research projects a 13.9% decline to 1.08 billion units in 2026, driven by a worsening memory chip shortage that is hitting budget models hardest while Apple and Samsung weather the storm.
The global smartphone market is heading for its steepest annual contraction on record, with shipments projected to slump 13.9% this year to 1.08 billion units, Counterpoint Research said Monday, citing a worsening shortage of memory chips.
"The question is no longer how to grow shipments or market share, but whether to remain in the market at all," Wang Yang, a principal analyst at Counterpoint, said. The memory chip shortage is the most severe supply-side disruption the smartphone industry has faced, he added, with manufacturers unable to offset the impact through pricing or product changes.
The forecast marks a downgrade from the 12.4% decline projected in February, with the squeeze in global chip supply exacerbated by the Iran war. Global smartphone wholesale prices rose 14% in the first quarter while shipments fell 3.1% year on year. That trend is expected to continue as inventory built before the supply shock becomes depleted, with some models priced below $150 likely to disappear from the market entirely.
The contraction threatens to reshape the competitive landscape, widening the gap between premium players with stable chip supply and budget-focused manufacturers that lack the margins to absorb rising component costs. Chipmakers have shifted production capacity to AI-related chips, making entry-level devices less economical to produce and squeezing the low end of the market.
Transsion, which is heavily exposed to the market for smartphones priced below $150, is forecast to suffer a 32% drop in shipments this year, according to Counterpoint. Rivals Xiaomi and Honor are projected to post full-year declines of 28% and 20% respectively. These manufacturers operate on thin margins and lack the procurement scale to secure preferential chip allocation, leaving them caught between cost increases they cannot absorb and consumers with limited spending power.
"Smartphone makers in the low and mid-tier are caught between cost increases they cannot absorb and consumers with limited spending power," Wang said.
The premium end of the market has proven more resilient. Apple posted record revenue for the first three months of the year, helped by customers upgrading to its iPhone 17 series. Apple's 2026 shipments are expected to remain flat before rising 5% next year, Counterpoint projections show. With more stable chip supply and stronger margins than many rivals, Apple is well placed to gain market share and could face less pressure to raise prices.
Samsung Electronics kept volumes steady in the first quarter and is expected by Counterpoint to register only a 4% decline in shipments over the full year, outperforming the wider market thanks to stable supply and a consistent product lineup.
For investors, the divergence between premium and budget smartphone makers is likely to persist as long as the memory chip shortage continues. Apple and Samsung, trading at elevated multiples relative to their Chinese peers, may benefit from market share gains even as the overall market shrinks. Meanwhile, companies like Xiaomi and Transsion face margin compression that could pressure valuations further. The memory chip shortage, now in its second year, shows no signs of easing, with chipmakers prioritizing high-margin AI accelerators over commodity memory for mobile devices.
This article is for informational purposes only and does not constitute investment advice.
