Why will smartphone shipments fall 13%?

Memory shortages and AI demand are driving a market shock

Analysts forecast a sharp contraction in global handset shipments driven primarily by a shortage of DRAM and other memory components. The crunch is tied to surging demand for memory from data centers and AI infrastructure, which has tightened supply and pushed prices higher. That ripple effect is making phones more expensive to build and squeezing margins, particularly at the low end of the market.

Facts and figures

• Industry forecast: Research firm IDC projects global smartphone shipments will drop about 12.9% year‑over‑year in 2026, to roughly 1.12 billion units — the largest annual decline on record.
• Root cause: Memory capacity and pricing are the central constraints; AI training and inference demand has eaten into supply that consumer device makers normally tap.
• Manufacturer impact: Major phone makers acknowledged higher component costs as a factor behind pricier new models and tighter inventory for budget devices.

Consequences for users and industry

• Budget phones may disappear or become rare as manufacturers focus limited memory chips on higher‑margin flagships.
• Upgrade cycles could lengthen: buyers faced with higher prices may hold phones longer, reducing replacement demand.
• Supply chain pressure will favor larger firms with buying power; smaller brands and emerging markets could face shortages.

What to watch next

• Memory suppliers’ capacity expansion plans and lead times; new production ramps would ease pressure but take months to years.
• Whether component rationing policies or government interventions emerge to prioritize consumer electronics.

For consumers, the immediate impact will be higher prices and fewer low‑cost choices. For the industry, the shortage is a structural challenge that links the booming AI compute market to the health of the broader mobile ecosystem.