The global smartphone market is expected to shrink by 2.1% in 2026, marking a downward revision from earlier projections. This shift is predominantly due to rising memory prices creating cost pressures for device manufacturers, according to recent analysis by Counterpoint Research.
Chinese brands such as Honor, Oppo, and Vivo are forecasted to face the most significant shipment reductions. The budget smartphone segment will be impacted the hardest, with component costs surging sharply.
Rising Costs and Market Impact
Since early 2025, the Bill of Materials (BoM) cost for devices under $200 has increased between 20% and 30%. Mid-range and premium models have also experienced component cost hikes, but to a lesser extent, around 10% to 15%. As a result, phone makers are recalibrating their strategies to manage profitability amid rising expenses.
Senior analysts at Counterpoint note that several manufacturers are downsizing their SKU variants and lowering hardware specifications. This includes compromises in camera quality, screen resolution, and RAM capacities to maintain profit margins despite cost inflation.
Projected Memory Price Hikes
Memory prices, especially DRAM, are forecasted to climb about 40% through the second quarter of 2026. This escalation could increase BoM costs by an additional 8% to over 15%. The direct consequence is a spike in the average selling price (ASP) of smartphones.
Counterpoint revised its forecast for ASP growth in 2026 to 6.9% year-on-year, almost double the previous 3.6% estimate made in September 2025. Some vendors are even repurposing older components or steering consumers toward higher-priced “Pro” models to offset cost pressures.
Market Examples and Brand Responses
Recent launches such as the OnePlus 15 and iQOO 15 in India underscore this trend, debuting at significantly higher prices than their predecessors. Samsung is also rumored to plan price increases for its upcoming Galaxy S26 series and older Galaxy A models.
Brands lacking extensive production scale or vertical integration face serious dilemmas balancing shipment volume and profitability. Counterpoint warns these smaller players may struggle to remain competitive under ongoing cost constraints.
Wider Industry and Consumer Effects
The memory chip shortage extends beyond smartphones, affecting related markets such as tablets. Xiaomi and Honor have already raised tablet prices in China as DRAM availability tightens. The root cause is soaring demand from AI data centers, which dominate chip production allocations.
This dynamic reshapes competitive advantages, favoring companies with stronger supply chain control or premium segment focus. While overall smartphone shipment growth has become negative, premium categories like foldable phones maintain resilience—growing 14% with Samsung as the leader.
Strategic Adjustments for Vendors
In 2026, vendors will likely adopt more selective product launches and push consumers toward higher-margin models. Efficiency improvements and portfolio optimization will be crucial to offset shrinking volumes and rising component costs.
Consumers may face fewer affordable options if device quality is scaled back or prices continue rising. The prevailing trend signals that higher costs for RAM and other memory components are becoming a permanent factor influencing smartphone pricing and availability.
The evolving market conditions emphasize the need for close monitoring of material costs and supply chain dynamics. The smartphone industry’s ability to innovate cost-effectively will determine not only shipment volumes but also broader technology accessibility worldwide in the coming years.
Summary of Key Forecasts and Trends:
| Factor | 2026 Projection / Trend |
|---|---|
| Global smartphone market size | Expected to contract by 2.1% |
| BoM increase (budget phones) | Up to 20%-30% since early 2025 |
| Memory price increase | Approx. 40% rise by Q2 2026 |
| ASP growth forecast | Revised to 6.9% YoY increase |
| Foldable smartphone growth | 14%, led by Samsung |
| Primary driver | High AI data center demand reducing memory supply |
The current market realities highlight a crucial turning point for smartphone manufacturers and consumers alike. The ongoing memory shortage and resultant cost increases will shape pricing strategies, product quality, and market composition through 2026 and beyond.
