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

The global smartphone market is expected to see its sharpest annual decline on record in 2026, with shipments set to drop by more than 14 percent year-on-year, according to analysts. The main reason behind this forecasted decrease is soaring chip and memory costs, which are pushing up handset prices and forcing manufacturers to cut lower-margin models and configurations, primarily in the lower price points.

Counterpoint Research, a consultancy, predicts that shipments will fall to around 1.07 billion units in 2026, significantly below the 1.2 billion shipped in 2023, and above the 1.25 billion units shipped in 2025. The increase in chip prices is driven by high demand from data centers and the artificial intelligence boom, passed down the supply chain, causing consumers to be wary of higher costs.

In response, flagships and other high-end models are being removed from the market. Apple is expected to raise the prices of its Macs and iPads, and is likely to do the same for its upcoming iPhones. Other major players like Google, Motorola, OnePlus, Oppo, Realme, Vivo, and Xiaomi have also announced price increases. While premium manufacturers can pass on more of the cost, mass-market producers may have to reduce storage, delay launches, or accept weaker margins due to their price-sensitive customers.

Samsung Electronics, the world's largest mobile phone maker, has raised the prices of its new-generation Galaxy Z foldables. Despite this, Samsung is expected to reclaim the lead in smartphone shipments this year, increasing its market share to 22.6 percent, just ahead of Apple. The top six Chinese mobile phone makers are forecast to account for 45.4 percent of the market this year.

Samsung has more flexibility in securing supply and redirecting products between markets due to its wide geographic reach and strong supply chain, giving it an advantage over its competitors during the downturn. The smartphone market is expected to remain under pressure in 2027 before rebounding more strongly in 2028, but it is unclear when chip prices will decrease as AI demand is expected to remain elevated for the foreseeable future.

Affordability is expected to recover more slowly due to the need for higher-cost inventory to move through the channel.