Just days ago, on December 16, 2025, Counterpoint Research released a bombshell update to its global smartphone forecast: shipments in 2026 are now expected to shrink by 2.1% year-over-year, a sharp reversal from earlier projections of flat or slight growth. The primary culprit? A severe shortage of memory chips—particularly DRAM—fueled by explosive demand from the AI sector, which has driven bill-of-materials (BoM) costs sharply higher across all price segments.
This downward revision represents a 2.6 percentage-point cut from prior estimates, with Chinese OEMs like Honor, Oppo, and Vivo facing the steepest reductions. Meanwhile, average selling prices (ASPs) are forecasted to rise 6.9%—nearly double the previous outlook—as manufacturers pass on costs or restructure portfolios. In an industry accustomed to cyclical recoveries, this memory-driven crunch threatens to prolong stagnation, testing consumer patience and forcing tough strategic choices.
The implications extend far beyond shipment numbers. Low-end devices have already seen BoM costs surge 20-30% since early 2025, mid-range by 15%, and high-end by 10%. With memory prices potentially climbing another 40% through Q2 2026, further BoM inflation of 8-15% looms, potentially leading to spec downgrades, delayed launches, and a more consolidated market favoring scale players like Apple and Samsung.
This in-depth analysis examines the roots of the memory shortage, revised forecasts in detail, differential impacts on manufacturers and segments, consumer consequences, and pathways forward in a challenging 2026 landscape.
The AI Boom’s Collateral Damage: Why Memory Supply Is Tightening
The smartphone industry’s woes trace directly to the artificial intelligence revolution. AI data centers and servers require vast quantities of high-bandwidth memory (HBM) and traditional DRAM—far more per unit than a smartphone. Suppliers like Samsung, SK Hynix, and Micron have pivoted aggressively toward these lucrative AI chips, which command margins up to ten times higher than commodity LPDDR modules used in mobile devices.
This reallocation has created acute shortages in consumer-grade memory. DRAM contract prices have already soared 75%+ year-over-year in Q4 2025, with further quarterly hikes anticipated. Counterpoint warns of an additional 40% rise through mid-2026, exacerbating an already strained supply chain.
Nvidia’s influence amplifies the pressure: its adoption of smartphone-style memory in power-efficient AI servers could double related prices by late 2026. As hyperscalers race to build infrastructure, smartphone makers compete for scraps, driving BoM costs inexorably upward.
Unlike past shortages tied to pandemics or geopolitics, this one is structural—prioritizing AI’s profitability over volume consumer markets. Relief may not arrive until new fab capacity online in 2027 or beyond, leaving 2026 as a pivotal stress test.
Revised Forecasts: A Market in Contraction
Counterpoint’s December update paints a sobering picture. Global shipments, buoyed to ~3.3% growth in 2025 by Apple’s iPhone 17 success and China’s rebound, are now slated for a 2.1% decline in 2026—tens of millions fewer units.
This 2.6-point downgrade hits Chinese brands hardest, as originally anticipated gains flip to losses for Oppo and Vivo. The low-end segment (<$200) suffers most, with unsustainable margins prompting portfolio cuts.
Yet market value may hit records: ASPs revised to +6.9% growth will push total revenue toward new highs, even as volumes contract. IDC echoes caution with a 0.9% shipment dip forecast, citing similar memory pressures plus Apple’s base-model delay to 2027.
TrendForce aligns closely, projecting 2% smartphone output shrinkage amid 5-7%+ additional BoM inflation.
Global Smartphone Forecast for 2025: Apple Set to Surpass Samsung in Shipments for the First Time in 14 Years
Segment and OEM Impacts: Uneven Pain
The crisis disproportionately burdens budget and mid-range devices, where memory comprises a larger BoM share and margins are thin.
- Low-End: BoM up 20-30% already; further hikes risk rendering models unviable. Expect widespread downgrades—e.g., reverting to 4GB RAM bases—or outright discontinuations.
- Mid-Range: 15% cost rises prompt camera, display, or storage compromises to preserve pricing.
- Premium: 10% increases more absorbable, with Apple and Samsung leveraging efficiency and scale.
Apple emerges resilient: optimized iOS reduces memory dependency, while vertical integration secures supply. Samsung, a major memory producer, benefits doubly from internal pricing and AI chip profits.
Chinese OEMs face existential threats in low-end dominance, accelerating consolidation toward premium focus or niche innovation.
Consumer Fallout: Higher Prices, Compromised Choices
For buyers, 2026 offers diminished value. Expect:
- ASP jumps of 6-10%+, hitting entry-level hardest.
- Spec regressions: reduced RAM/storage, simpler cameras, or reused chipsets.
- Delayed upgrades: longer cycles as “good enough” devices suffice.
- Regional variances: Price-sensitive markets like India/SEA see sharpest availability drops.
On-device AI features, once hyped as upgrade drivers, may stall without ample memory, further dampening excitement.
Refurbished/second-hand demand could surge as new devices feel overpriced for marginal gains.
Adaptation Strategies: How the Industry Responds
Manufacturers employ multifaceted defenses:
- Portfolio Restructuring: Trim low-margin lines; emphasize premium “Pro” variants.
- Spec Optimization: Downgrade non-essential components; reuse proven parts.
- Software Efficiency: Enhance OS to minimize hardware needs (Apple’s forte).
- Supply Securing: Long-term supplier deals; explore alternatives.
- Price Pass-Through: Tiered increases, bundled services to justify costs.
Some speculate microSD returns for expandable storage, offsetting NAND hikes.
Longer-term, investments in alternative memories or fab expansions could ease pressures post-2026.
Broader Ecosystem Ripples
The shortage extends beyond smartphones. PCs/notebooks face similar 2-5% contractions and 5-15% price hikes. Even consoles and EVs feel margin squeezes.
This highlights AI’s double-edged impact: accelerating innovation while crowding consumer markets.
Recommendations: Navigating 2026 Wisely
For Consumers:
- Upgrade in late 2025 if needed—lock in pre-hike pricing/specs.
- Prioritize premium brands for longevity and resilience.
- Consider refurbished/certified pre-owned for value.
- Extend current device life via battery replacements/software tweaks.
For Manufacturers:
- Accelerate software differentiation to reduce hardware dependency.
- Diversify supply chains beyond top-three memory giants.
- Communicate transparently on price adjustments to retain trust.
- Invest in efficiency innovations for future-proofing.
For Investors/Analysts:
- Favor scale leaders (Apple, Samsung) with strong margins.
- Monitor Chinese OEM recovery potential in premium shifts.
- Watch fab announcements for 2027 relief signals.
Conclusion: A Pivotal Year of Reckoning
The revised 2026 smartphone shipment forecasts underscore a transformative challenge: memory shortages, propelled by AI’s insatiable appetite, are inflating BoM costs and contracting a market poised for recovery. While volumes may shrink 2.1%, rising ASPs could sustain revenue records—yet at the risk of alienating price-sensitive buyers and stunting innovation in accessible segments.
Apple and Samsung’s relative strength highlights scale’s advantages, while others must adapt swiftly or cede ground. Ultimately, 2026 tests the industry’s resilience: balancing profitability amid constraints, prioritizing meaningful advances over incremental ones.
As supply eventually catches demand—likely post-2027—the lessons from this crunch may forge a more efficient, consolidated ecosystem. For now, prudence prevails: whether buying, building, or observing, prepare for a year where every gigabyte counts.
