Smartphone Shipments to Plunge 12.9% in 2026 Because AI Needs All the Memory Chips
IDC's latest forecast reveals that global smartphone shipments will plunge 12.9% year-over-year to 1.12 billion units in 2026 — the largest single-year decline in the industry's history. The culprit isn't consumer apathy or economic recession. It's AI eating all the memory chips.
The Memory Supply Chain Tsunami
The smartphone industry is about to experience what IDC Vice President Francisco Jeronimo calls "not a temporary squeeze, but a tsunami-like shock originating in the memory supply chain." The root cause: tech giants including Meta, Google, and Microsoft are hoarding DRAM and NAND flash memory at unprecedented rates to fuel their AI infrastructure build-out.
This insatiable demand for memory chips from hyperscale data centers is driving prices through the roof, making it increasingly uneconomical for smartphone manufacturers to produce affordable devices. The irony is thick — the same companies promising AI will transform your phone experience are the ones making phones too expensive to buy.
The Death of the Budget Smartphone
Perhaps the most alarming finding: the sub-$100 smartphone segment, which accounted for 171 million devices, is becoming "permanently uneconomical." That's not a temporary market adjustment — it's the end of affordable smartphones for hundreds of millions of potential buyers in developing markets.
Average selling prices are expected to surge 14% to a record $523, pricing out consumers at the lower end of the market. Low-end Android manufacturers will be hit hardest, while Apple and Samsung — with their premium pricing and supply chain leverage — are positioned to actually gain market share from the carnage.
Winners and Losers
The smartphone market's pain is Wall Street's gain. Memory chip manufacturers are celebrating record prices, and AI infrastructure companies couldn't care less about the collateral damage to consumer electronics. Apple and Samsung's dominant positions give them preferential access to memory supply and the pricing power to absorb higher component costs.
Meanwhile, Chinese manufacturers like Xiaomi, Oppo, and Vivo — who built their empires on affordable devices — face an existential challenge. Their razor-thin margins leave no room to absorb surging memory costs.
The Bigger Picture
IDC projects a modest 2% recovery in 2027 and a 5.2% rebound in 2028, but the structural damage may be permanent. The AI industry's appetite for memory chips shows no signs of slowing down, and the smartphone industry is learning the hard way that it's no longer the most important customer in the semiconductor supply chain.
We're witnessing a fundamental power shift in the tech industry. For two decades, smartphones drove semiconductor demand and innovation. Now, AI data centers have taken the wheel, and your next phone will cost more because Meta needs more RAM for its latest language model. Welcome to the new tech food chain.