Global smartphone shipments are expected to decline by around 2.1% in 2026, technology research firm Counterpoint said on Tuesday, as rising chip costs and supply-chain disruptions weigh on device makers. The forecast highlights what the expected decline means for the industry, who is most affected, where the pressure is highest, why costs are rising, and *how manufacturers are adjusting to the trend. According to the research, the shortage of legacy memory chips — as manufacturers prioritise AI and high-performance computing semiconductors — is inflating component costs and pressuring margins, particularly for entry-level and budget devices priced under $200. Chinese brands such as Honor and Oppo, which compete heavily in cost-sensitive segments, face the greatest vulnerability due to low margins. Meanwhile, premium device makers like Apple and Samsung are expected to fare better amid these challenges.

Counterpoint said the shift in memory usage — with Nvidia and others deploying smartphone-style memory chips in AI servers — could drive up memory prices and further squeeze supply for traditional device makers. Entry-level and mid-range smartphone markets, which account for a significant share of global volume, are seeing component cost increases of 20% to 30%, dampening production and shipment forecasts. The research firm noted that this dynamic, if unabated, could also delay recovery in developing markets where affordability drives sales.

Other analysts, such as IDC, have forecasted a modest 0.9% decline in global shipments for 2026, reinforcing the view of an industry facing structural headwinds rather than cyclical downturn. These projections suggest that smartphone makers must diversify revenue streams beyond device sales — such as services, subscriptions and ecosystem lock-ins — to maintain profitability. For many brands, integrated services, software upgrades and after-sales revenue are becoming increasingly important as hardware margins compress.

Rising chip costs and supply constraints also underscore the critical role of semiconductor supply chains in global tech production, with memory supply bottlenecks and prioritisation of high-end chips affecting multiple industries beyond phones. Smartphone makers are exploring alternative sourcing strategies, closer partnerships with chip suppliers, and longer-term agreements to secure volume at feasible prices. However, these moves may take time to offset immediate cost pressures.

For investors and market watchers, the projected shipment decline signals broader shifts in consumer technology demand and supply-chain realignment amid the AI revolution. While premium and niche segments may sustain growth, traditional volume drivers are weakening, pointing to a transitional phase for the global smartphone market as it adjusts to higher input costs and changing usage patterns.

Source: Reuters