Memory shortage could cause the biggest dip in smartphone shipments in over a decade
TL;DR
AI-driven RAM shortages are causing smartphone shipments to drop by over 12% in 2026—the largest decline in a decade. Prices will rise 14%, making budget phones unsustainable and forcing market consolidation.
Key Takeaways
- •Smartphone shipments are predicted to drop 12-13% in 2026 due to AI-driven RAM shortages, the biggest single-year decline in over a decade.
- •Average smartphone prices will rise 14% to $523, potentially making sub-$100 phones permanently uneconomical and shrinking low-end markets by 20% or more.
- •The memory crisis will trigger a structural market reset, with smaller players exiting, regional declines exceeding 20%, and premium phones showing more resilience.
- •RAM prices are expected to stabilize by mid-2027, but supply constraints will continue affecting the market through late 2027, especially for LPDDR4 memory.
- •OEMs are responding with price hikes, launch delays, and specification trade-offs, while the second-hand device market is expected to grow due to pricing volatility.
A rise in the need for computers and data centers to power AI is causing a massive shortage of RAM, driving memory prices sharply higher. Now, analyst firm IDC predicts that this will cause smartphone shipments to plummet by 12.9% this year, making it the biggest single-year dip in more than a decade. Hours after IDC published its report, another analyst firm, Counterpoint, made a similar prediction and said the market will dip by 12% this year.
Earlier this year, IDC reported that manufacturers shipped 1.26 billion devices in 2025. The firm predicts that figure will drop to just 1.12 billion this year.
“The memory crisis will cause more than a temporary decline; it marks a structural reset of the entire market, fundamentally reshaping the long‑term TAM [total addressable market], the vendor landscape, and the product mix,” said Nabila Popal, senior research director with IDC’s Worldwide Quarterly Mobile Phone Tracker, in a statement.
Popal said that because of memory shortage, the average retail price of a smartphone is expected to rise by 14%.
“We expect consolidation as smaller players exit, and low-end vendors face sharp shipment declines amid supply constraints and lower demand at higher price points. Although shipments will witness a record drop, smartphone ASP [average selling price] is projected to rise 14% to a record $523 this year,” she added.
Popal also noted that rising component costs could make the sub-$100 smartphone “permanently uneconomical,” pricing out phone makers that manufacture devices at that price point.
The firm said that, because of this trend, shipments in the Middle East and Africa will drop more than 20% year-over-year. China and the broader Asia Pacific region (excluding Japan) will also see declines of 10.5% and 13.1%, respectively.
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IDC added that it expects RAM prices to stabilize by mid-2027.
Counterpoint said that premium smartphones would be more resilient to this change, but the sub-$200 smartphone segment will see a 20% dip.
“The impact is expected to continue through H2 2027, as it will take several quarters for memory supply expansion to materialize. Lower-end smartphones are likely to be affected the most, especially as LPDDR4 supply is shrinking faster than expected. OEMs are already responding with launch delays, streamlined portfolios, and specification trade-offs. We have also observed 10% to 20% price increases across some Android OEM portfolios in January 2026,” Principal Analyst Yang Wang said.
The firm also predicted that pricing volatility amid handsets will also drive the second-hand devices market up.
Earlier this year, Nothing co-founder and CEO Carl Pei also warned that smartphones will cost more in 2026 as memory costs for smartphones rise. “Brands now face a simple choice: raise prices by 30% or more in some cases, or downgrade specs. The ‘more specs for less money’ model that many value brands were built on is no longer sustainable in 2026,” he said.
“As a result, some markets, particularly entry and mid-tier segments, are likely to shrink by 20% or more, and brands that have historically dominated these segments will struggle,” Pei added.