Technology
Global smartphone shipments hit 13-year low as memory costs squeeze the market
Surging DRAM and NAND prices are forcing manufacturers to raise phone costs, driving demand to historic lows—though Apple and Samsung are faring better than rivals.
Ars Technica
The global smartphone market has entered a steep downturn, with shipments plummeting 11 percent in the latest quarter and hitting their weakest point for that period since 2013. The culprit: soaring memory chip costs that are being driven by massive demand for AI infrastructure components.
Why memory costs matter so much right now#
The semiconductor industry has been redirecting production capacity toward AI computing systems, leaving far fewer DRAM and NAND chips available for consumer devices like phones and laptops. As supply tightens, prices for these critical components have climbed sharply. For budget phones in particular—those priced under $500—the impact is devastating: memory costs now consume roughly half of the total manufacturing cost, forcing steep price increases that consumers are unwilling to pay.
Even flagship devices feel the squeeze, though less severely. Premium phones typically allocate only about 25 percent of their manufacturing cost to memory, meaning they have more room to absorb price hikes without becoming unaffordable. That price gap is widening between high-end and budget segments, pushing potential buyers out of the market entirely.
Winners and losers among the top players#
According to Counterpoint Research, the top five smartphone makers—Samsung, Apple, Oppo, Vivo, and Xiaomi—have all felt the pressure, though with markedly different outcomes. Apple managed a 3 percent shipment increase last quarter by holding its pricing strategy steady while competitors raised costs. Samsung has similarly weathered the downturn better than smaller rivals.
By contrast, Chinese manufacturers Oppo, Vivo, and Xiaomi all posted shipment declines in the second quarter of 2026. Their reliance on lower-margin segments—where memory cost inflation hits hardest—has left them more exposed to the market contraction. An analysis from Omdia projects that global smartphone sales in the sub-$400 category will drop 22 percent as memory expenses continue climbing.
Looking ahead#
Apple's pricing advantage may not last once the company unveils its next generation of iPhones in the coming months. Whether new features and capabilities can justify sustained pricing—or if the company will succumb to the broader market pressure—remains to be seen.
