Smartphone market set to fall 13% due to memory shortage: IDC

Smartphone market set to fall 13% due to memory shortage: IDC

Smartphone Market Braces for Contraction Amid Memory Chip Shortage

The global smartphone market is facing significant headwinds in 2026 due to a severe shortage of memory chips, driven by surging demand from AI infrastructure. According to IDC, the industry could see a contraction of up to 5.2% in the worst-case scenario, with average selling prices (ASPs) rising by 6% to 8% as manufacturers grapple with elevated component costs. This marks a sharp reversal from earlier growth projections and underscores the disruptive impact of supply constraints.

The root cause lies in the reallocation of semiconductor production capacity toward high-margin memory solutions for AI data centers. Major manufacturers like Samsung, SK Hynix, and Micron have prioritized high-bandwidth memory (HBM) and DDR5 for hyperscalers such as Microsoft and Google, leaving limited supply for consumer devices. DRAM prices have surged by over 50% in 2025, with further increases of 40% expected in early 2026, according to Counterpoint Research. For mid-range smartphones, memory costs now account for 15–20% of total bill of materials (BOM), forcing OEMs to raise prices or reduce specifications.

Low- and mid-tier manufacturers, including TCL, Xiaomi, and Lenovo, are particularly vulnerable. These firms operate on thin margins and have little flexibility to absorb cost increases, leading to potential price hikes for end users. In contrast, Apple and Samsung, with their long-term supply agreements and financial reserves, are better positioned to stabilize pricing and secure inventory.

The shortage is also reshaping market dynamics. IDC warns that the industry's decade-long trend of democratizing flagship features in affordable devices is reversing, as OEMs face pressure to downspec models or pass costs to consumers. Meanwhile, channel inventory builds in Q4 2025 have outpaced earlier forecasts, as vendors prepare for further price volatility.

For investors, the outlook highlights a bifurcated market: while industry leaders may mitigate risks through scale and vertical integration, smaller players face margin compression and potential market share losses. The duration of the shortage—and its impact on consumer demand—will depend on how quickly production capacity shifts back to consumer-grade memory, a process that could take years.

Source: IDC Blog, Source: CNBC,