Smartphone Shipments To Shrink 2.1% Globally As Input Costs Pile Up: Report

Global smartphone shipments are expected to reduce by 2.1% in 2026 due to rising input costs from a supply shortage of physical memory modules, according to a Counterpoint Research report.

The report stated that low-end smartphones will suffer the most "severe" impact due to this. The input cost or "bill of materials" cost has gone up 20-30% since the beginning of 2025.

"What we are seeing now is the low end of the market (below $200) being impacted most severely, with bill of materials costs increasing by 20%-30% since the beginning of the year," Research Director MS Hwang said.

“The market’s mid- and high-end segments have seen 10%-15% price increases," he added.

Researchers also noted that sharp price hikes on smartphones are not sustainable for mobile phone manufacturers if they cannot pass the costs on to consumers.

This may lead to them even discontinuing certain smartphone lines, making them manufacture fewer lower-end phones — a trend that researchers are already seeing take shape.

“In the lower price bands, steep price increases on smartphones are not sustainable,” Senior Analyst Yang Wang said.

“And if cost pass-through isn’t possible, original equipment manufacturers will start pruning parts of their portfolios – that’s actually what we are starting to see with significantly reduced volumes of low-end stock keeping units," he added.

This is due to AI firms' widely buying and using specialised RAM modules for their data centres, creating a shortage in the supply side of the physical memory market.

Due to its lucrative potential, many physical memory manufacturers have also shifted away from making traditional memory components for personal computers and smartphones, and have shifted to High-Bandwidth Memory chips for AI companies. This is estimated to net them 10 times more margins, according to reports.

Lineup changes and passing costs on to consumers will also have an effect on the average selling prices, which are expected to increase in the coming year by 6.9%, from the 3.9% in the organisation's previous forecast from September 2025.

Smartphone makers best positioned to weather supply shortages will be those with scale, broad product portfolios (especially on the higher-end line) and tight vertical integration, the report said.

“Apple and Samsung are best positioned to weather the next few quarters, But it will be tough for others that don’t have as much wiggle room to manage market share versus profit margins. We will see this play out especially with the Chinese OEMs as the year progresses," Wang said.

The researchers noted that these companies are downgrading certain aspects of their product specifications for their mobile smartphones.

“In some models, we are seeing downgrades of components like camera modules and periscope solutions, displays, audio components and, of course, memory configurations,” Senior Analyst Shenghao Bai said.

“Other tactics include reusing old components, streamlining the portfolio, and pushing consumers to higher-specification ‘Pro’ variants and adopting new designs to stimulate upgrades," he added.