The big picture: Memory prices have climbed sharply in recent months, driven by surging demand from AI data centers. These higher costs are rippling across the consumer electronics sector, making upgrades and new purchases increasingly expensive. As consumers delay buying decisions, the global smartphone market is projected to contract by 12.9 percent in 2026.
According to a new report from market research firm International Data Corporation, global smartphone shipments are expected to total around 1.1 billion units this year, down from 1.26 billion in 2025. This marks a significant downward revision from the company's November 2025 forecast, which projected a decline of between 0.9 percent and 5.2 percent, with the latter described as the "pessimistic" scenario.
Explaining the updated outlook, IDC Vice President for Worldwide Client Devices Francisco Jeronimo said the memory crunch is not a temporary disruption but a "tsunami-like shock originating in the memory supply chain." He added that the ripple effects are spreading across the broader consumer electronics industry and that conditions will worsen before they improve.
The report states that the lower end of the smartphone market is likely to be hardest hit, as thinner margins leave vendors little room to absorb higher component costs. With those additional expenses expected to be passed on to consumers, Jeronimo warned that prices could rise sharply, making it increasingly difficult to operate in price-sensitive segments.
Regional markets such as the Middle East and Africa, where the majority of sales come from the budget segment, are expected to be among the hardest hit with shipments projected to fall 20.6 percent year over year. The world's two largest markets, China and the broader Asia-Pacific region, are forecast to decline by 10.5 percent and 13.1 percent, respectively.
According to IDC Senior Research Director Nabila Popal, the average selling price of smartphones could rise 14 percent to $523 in 2026, further dampening demand among price-sensitive consumers and potentially forcing some smaller vendors out of the market. While prices may stabilize by mid-2027, they are unlikely to return to pre-crisis levels, making the sub-$100 segment "permanently uneconomical."
Although smaller manufacturers are expected to struggle with rising component costs, larger players such as Apple and Samsung are seen as better positioned to absorb the shock. Jeronimo said the two companies are likely not only to weather the downturn but potentially to "expand market share as the competitive landscape tightens."
The memory shortage has also pushed up prices for graphics cards, solid-state drives, and traditional hard disk drives, making hardware upgrades increasingly expensive. Video game consoles are facing similar pressure, with Nintendo's Switch 2 widely expected to go up in price soon. Sony is also reportedly considering delaying its next PlayStation console to 2028 or 2029 in response to ongoing supply constraints.
Smartphone sales are expected to drop 13% worldwide amid memory crunch
