The smartphone market is bracing for a significant shift in 2026, with a projected decline in shipments and a notable increase in average selling prices, according to a new report from Counterpoint Research. The primary driver behind this trend is the escalating demand for memory chips, largely fueled by the burgeoning artificial intelligence sector.
Counterpoint Research anticipates that global smartphone shipments could contract by 2.1% in 2026, a downward revision from their previous forecast which predicted flat to positive growth. It’s important to note that shipments are a key indicator of market activity, reflecting the volume of devices moving into sales channels, rather than direct sales to consumers.
Concurrently, the average selling price (ASP) of smartphones is expected to climb by 6.9% year-on-year in 2026. This marks a substantial increase from Counterpoint’s earlier projection of a 3.6% rise.
This market recalibration is directly linked to persistent shortages and supply chain bottlenecks within the semiconductor industry, which are driving up the cost of essential components. The insatiable global appetite for AI-driven technologies has led to an unprecedented demand for advanced systems, particularly those developed by companies like Nvidia. These systems rely heavily on high-performance memory chips, with SK Hynix and Samsung being the dominant suppliers of these crucial components.
A specific type of memory chip, Dynamic Random-Access Memory (DRAM), plays a critical role not only in AI data centers but also in the functionality of smartphones. The demand for DRAM has surged, outpacing supply and causing prices to escalate throughout the current year.
The impact is already being felt across the smartphone spectrum. For entry-level devices priced below $200, the bill of materials (BOM) – the total cost of components required to manufacture a single unit – has risen by 20% to 30% since the beginning of 2025. Mid-range and high-end smartphone segments have experienced a more moderate, yet still significant, increase in BOM costs, ranging from 10% to 15%.
Counterpoint Research forecasts that memory chip prices could see an additional 40% increase by the second quarter of 2026. This would translate into BOM costs for smartphones escalating by an additional 8% to over 15% from their already elevated levels. Consequently, manufacturers are likely to pass these increased component costs onto consumers, directly contributing to the projected rise in average selling prices.
In this challenging market environment, industry leaders like Apple and Samsung appear to be in a stronger position to navigate the upcoming quarters. Their scale and established supply chain relationships may provide a buffer against the rising costs and potential market volatility. However, manufacturers with less financial flexibility or market share may find it increasingly difficult to balance profit margins with maintaining market presence. This pressure is expected to be particularly acute for Chinese smartphone manufacturers operating in the mid-to-lower price segments.
To mitigate the impact of rising component costs, smartphone companies may resort to strategic adjustments. These could include downgrading less critical components such as camera modules, displays, or audio systems, or potentially incorporating older, more cost-effective components. Furthermore, companies might intensify efforts to encourage consumers to opt for higher-priced, premium models, thereby attempting to preserve overall revenue and profitability amidst the evolving market dynamics.
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