Smartphone Apocalypse? Industry Faces Massive 152M Unit Drop by 2026 Amid Surging Chip Costs

Global smartphone shipments are projected to experience a significant decline of 12.2% year-on-year (YoY) in 2026, falling from 1.246 billion units in 2025 to an estimated 1.093 billion units. This represents a substantial drop of 152 million units. According to an analytical report by Omdia, this downturn is primarily driven by recent scarcity and a sharp increase in memory prices. Both DRAM and NAND flash memory have seen average prices surge by over 80% quarter-on-quarter in the first quarter of 2026, with further hikes anticipated through the second half of 2026.

In addition to memory price inflation, the report highlights a projected increase in the average selling price (ASP) of smartphones as a key factor contributing to the decline in shipments. The ASP is expected to rise from $467 in 2025 to $565 in 2026. Jusy Hong, Senior Research Manager at Omdia, commented on this trend, stating that the global smartphone industry is undergoing a period of significant disruption. He noted that manufacturers are actively managing their inventories to mitigate rising cost pressures, with some vendors gaining early-mover advantages by increasing component inventories to minimize the impact of future price hikes.

The anticipated decline in shipments follows broader indications of chip price increases, partly due to a refocus on AI models. This situation underscores how scarcity, surging chip prices, and escalating regional conflicts continue to affect the global importation and exportation of smartphones. While industry players had previously forecasted a general price rise in the smartphone market due to reduced production, demand for refurbished devices is now expected to increase as consumers react to elevated market prices. Experts suggest that this surge in refurbished device sales will consequently reduce overall shipment volume, as consumers seek alternatives amidst shortages of new devices and higher prices.

The pressures on smartphone shipments, which began with a 6% YoY decline in global shipments during the first quarter of 2026, are now expected to persist throughout 2026 and potentially extend into 2027. Omdia's report indicates that this transition phase is expected to last until the second half of 2027, with an easing phase commencing in 2028. Hong explained that once DRAM and NAND pricing stabilizes and plateaus at new levels, the market is expected to enter a stabilization phase, shifting focus back to other strategic priorities. A readjustment phase is currently anticipated in early 2028, driven by an increase in supply capacity. However, Hong also noted that an earlier or short-term ease could occur, depending on how AI data center demand evolves. Overall, memory prices are projected to begin correcting towards the end of 2027, although the baseline cost of manufacturing sub-$100 smartphones is expected to remain too high to support a drop in end-user pricing.