The global smartphone industry is facing its sharpest annual contraction on record, with shipments expected to fall 13.9 percent to 1.08 billion units in 2026, according to the latest forecast from Counterpoint Research.
The revised outlook is worse than Counterpoint’s earlier projection of a 12.4 percent decline, reflecting a deepening global memory chip shortage that has been intensified by geopolitical disruptions and surging demand for AI-related semiconductors.
The impact is being felt most strongly in the entry-level smartphone segment. As chipmakers prioritize higher-margin AI and data center chips, supply available for low-cost smartphones has tightened significantly, making devices priced below $150 increasingly difficult and uneconomical to manufacture, the report indicated.
The market is already showing signs of stress. Global smartphone wholesale prices increased 14 percent in the first quarter of 2026, while shipments declined 3.1 percent year-over-year. Counterpoint expects pricing pressure to continue as inventories built before the supply crunch are depleted. Some ultra-budget smartphone models may disappear from the market entirely.
Counterpoint analyst Wang Yang said manufacturers serving the low- and mid-range smartphone segments are struggling to balance rising component costs with limited consumer spending power. The memory chip shortage represents one of the most severe supply-side disruptions the smartphone industry has experienced, with vendors having few options to offset higher costs through product redesigns or pricing strategies.
The premium smartphone market has proven more resilient. Apple continues to benefit from strong demand for its latest iPhone 17 series, helping the company achieve record revenue during the first quarter.
Counterpoint expects Apple’s smartphone shipments to remain flat in 2026 before growing 5 percent in 2027. Stable component supply and stronger profit margins position Apple to gain market share during the downturn.
Samsung is also expected to outperform the broader market. The company maintained stable shipment volumes during the first quarter and is forecast to record only a 4 percent decline in shipments for the full year due to its diversified supply chain and broad product portfolio.
Among major Android brands, the biggest challenges are expected for companies focused on affordable smartphones. Transsion is forecast to suffer a 32 percent decline in shipments, while Xiaomi and Honor are projected to see shipment drops of 28 percent and 20 percent, respectively.
Emerging market brands heavily reliant on low-end lineups (such as Transsion and Xiaomi) are expected to take the biggest hit. Samsung and Apple, with their premium portfolios, will experience relatively limited impact and are expected to benefit from some indirect effects.
The latest forecast highlights how the global semiconductor shortage is reshaping the smartphone market, with premium brands emerging stronger while budget-focused vendors face mounting pressure on profitability and market share.
BABURAJAN KIZHAKEDATH
