The smartphone industry is currently experiencing a certain kind of irony. This year, fewer people will be able to afford phones due to the same AI boom that is meant to make them smarter.
In 2026, the price tags tell the story before any analyst report does when you walk into practically any electronics store. IDC now projects a 12.9% decline in smartphone shipments worldwide this year, from 1.26 billion units in 2025 to about 1.12 billion. It’s not because people suddenly stopped wanting new phones; rather, it’s the steepest single-year decline in over a decade. The reason for this is that the memory chips they contain have grown more expensive, rare, and reserved for someone else.
The AI data center is someone else. The three companies that produce nearly all of the world’s DRAM and NAND—Samsung, SK Hynix, and Micron—have been stealthily shifting their cleanroom capacity to high-bandwidth memory designed for AI servers . The wafers go where the margins are highest because it’s a much more lucrative business than providing RAM for a mid-range Android phone. In a literal sense, every chip assigned to an Nvidia GPU stack is a chip that isn’t used in your next phone.
Depending on which forecast you read, Counterpoint’s numbers fall between 12% and 15% of IDC’s. IDC’s Nabila Popal described it as more akin to a structural reset than a brief decline, and that wording seems appropriate. The average selling price is expected to increase by 14% to approximately $523, which seems almost reasonable until you take into account the implications for the bottom of the market.
The phones that put smartphones in the hands of people in Lagos, Jakarta, or rural India for less than $100 are turning into what IDC bluntly refers to as “permanently uneconomical.”” Carl Pei, who runs Nothing, put it more plainly: brands now face a choice between raising prices 30% or quietly stripping out the specs that justified the purchase in the first place. Both choices are bad, and it’s difficult to ignore how rapidly the industry’s ten-year trend toward more affordable, high-quality phones is reversing.
Not all of the damage will fall equally. According to Counterpoint, Apple and Samsung are the “most insulated” brands because their cash reserves and supply contracts are secured 12 to 24 months in advance. While Xiaomi’s shipments fell by almost 19% in a single quarter, Huawei has actually increased by keeping prices unchanged. The areas most affected are those that rely on low-cost phones; China and the rest of Asia Pacific are not far behind, and the Middle East and Africa are facing a decline of more than 20%.
One side effect worth keeping an eye on is the market for refurbished phones, which is predicted to grow by 13% this year, most likely thanks to consumers who would prefer a used flagship over a downgraded new one. This crisis seems to be subtly influencing consumer behavior in a way that the industry never really anticipated.
According to IDC, RAM prices could level off by the middle of 2027. Counterpoint is less hopeful, suggesting that the effects would continue into the second half of the year. In any case, this is not the type of decline that recovers in a quarter or two. Which brands will survive to witness the recovery is still up in the air.
