Smartphone shipments set for record 14% drop in 2026 as chip costs soar

The global smartphone market is expected to experience its steepest annual decline on record in 2026, according to Counterpoint Research. Shipments are projected to drop by more than 14% year-on-year, reaching approximately 1.07 billion units. This sharp decline is primarily attributed to soaring chip and memory costs, which have pushed up handset prices and prompted manufacturers to cut lower-margin models.

The report forecasts that 2026 will see fewer shipments than the 1.21 billion units shipped in 2024 and the 1.25 billion units shipped in 2025. Data center demand and the artificial intelligence boom have driven chip prices to unprecedented levels, causing these costs to trickle down the supply chain. As consumers become less willing to pay higher prices, flagships with higher price tags may become less appealing.

This trend is expected to persist for several product cycles, as manufacturers remove economically unviable products and configurations. While premium manufacturers with strong brands can absorb more of the cost, mass-market producers may reduce storage, delay launches, or accept weaker margins due to their more price-sensitive customer base.

Samsung Electronics, the world's largest mobile phone maker, has also increased prices for its latest Galaxy Z foldables, indicating the gravity of the manufacturing pressures. Despite this, Samsung is on track to reclaim its top position in smartphone shipments this year, with market share projected to rise to 22.6%, just ahead of Apple's 22.5%.

Chinese manufacturers, including Huawei, Honor, Oppo, OnePlus, Realme, and Xiaomi, are expected to account for 45.4% of the market in 2026. Samsung's extensive geographic reach and strong supply chain are expected to give it an edge, allowing it to secure supply, redirect products between markets, and maintain availability. However, Samsung may accept some profitability pressure to capture market share, but it should still be better positioned than competitors during the downturn.

The smartphone market is anticipated to remain under pressure in 2027 as chip prices remain elevated due to sustained artificial intelligence demand. Affordability is expected to recover more slowly as high-cost inventory moves through the supply chain.