The price hikes in memory chips are significantly altering the competitive dynamics within the global smartphone market, exacerbating the divide between high-end brands and mid-to-low-tier manufacturers.

Recently, market research firms IDC and Counterpoint Research released their reports on global smartphone shipments for the second quarter of 2026. Although their data differ in specific numerical values, the overall trend aligns closely: global smartphone shipments have plummeted due to persistent shortages and escalating prices of memory chips.

According to IDC, global smartphone shipments in the second quarter reached 277.5 million units, marking a 6.7% year-on-year decrease and the second consecutive quarter of decline. Counterpoint's data indicates an 11% year-on-year drop, representing the lowest second-quarter level since 2013. Despite discrepancies in statistical methods, both firms attribute the downturn to the memory chip crisis.

Skyrocketing Memory Costs Cripple Low-End Market

Nabila Popal, Senior Research Director of Global Consumer Devices at IDC, highlighted that memory costs have surged nearly 300% year-on-year, constituting over 65% of the total bill of materials (BOM) cost for low-end models. Manufacturers focusing primarily on low-end products are now struggling for survival.

Memory suppliers continue to prioritize capacity allocation for AI data centers, leading to a surge in DRAM and NAND prices throughout the quarter. Smartphone manufacturers have responded by passing on these rising costs to consumers through multiple rounds of price increases, with entry-level and mid-range models bearing the brunt.

Shilpi Jain, Senior Analyst at Counterpoint, stated that the global memory crisis has eclipsed all other factors to become the industry's foremost challenge. "What was merely a component supply issue last year has now evolved into a comprehensive demand problem," she noted. Entry-level and mid-range products, which dominate global shipments, are particularly susceptible to fluctuations in material costs, making it challenging to sustain previous pricing structures.

Meanwhile, geopolitical tensions in the Middle East have driven up oil and transportation costs, exacerbated by macroeconomic factors such as slowing global economic growth and high inflation. Price-sensitive consumers have been hit particularly hard. Manufacturers have adopted diverse strategies: some have raised prices and absorbed profit pressures, others have extended the lifecycle of older models, and some have directly reduced new product launches.

Apple and Samsung Buck the Trend, While Chinese Manufacturers Face Mounting Pressure

Amid the challenging market conditions, high-end brands have demonstrated resilience by leveraging supply chain advantages and bargaining power. IDC data reveals that Samsung shipped 62.7 million units in the second quarter, marking an 8.1% year-on-year increase and capturing a 22.6% market share. Apple shipped 55.8 million units, up 15.4% year-on-year, with a 20.1% market share. Both companies stand out as the only top-five vendors to achieve shipment growth for two consecutive quarters. While the firms differ in their assessments of Apple's growth rate, both acknowledge the iPhone 17 series as the primary driver.

Apple's second-quarter shipments reached a record high for the same period, with its annual market share expected to reach 22%. For Samsung, the Galaxy S26 series has entered its volume ramp-up phase, with the Ultra version performing exceptionally well. By leveraging vertical integration and implementing minimal price hikes, Samsung has maintained growth in India and the Middle East. IDC noted that the key advantage for both companies lies in securing memory supply in advance.

In contrast to the high-end market, Chinese brands focusing on the mid-to-low-end segment face greater pressure. Xiaomi shipped 31.2 million units, down 26.3% year-on-year. OPPO shipped 28.8 million units, a 17.5% decline, while vivo shipped 21.2 million units, down 19.4%. The sub-$200 market remains crucial for volume, prompting many manufacturers to refurbish older models or relaunch 4G versions to defend their price points. Xiaomi experienced the largest decline but actively compressed low-end shipments to protect profits and shifted its focus to the high-end segment. Huawei was an exception, with IDC data showing a 20.9% year-on-year increase, driven by price stability in China, targeted promotions, brand loyalty, and expanded product lines. Counterpoint data also indicated a 6% growth for Huawei.

The Chinese market continued its decline, with second-quarter shipments reaching approximately 66.01 million units, down 4.3% year-on-year, marking the fifth consecutive quarter of decline. Android vendors raised prices due to soaring memory costs, suppressing replacement demand. The effectiveness of "national subsidies" weakened, with "618" sales volume dropping nearly 15% year-on-year. Against this backdrop, Huawei and Apple stood out in the Chinese market, both achieving around 20% growth. Huawei led with a 22.6% share, followed by Apple at 18.1%. Amid widespread price hikes by Android vendors, Huawei maintained price stability domestically, while Apple refrained from raising prices and both launched targeted promotional strategies, further strengthening their market competitiveness.

Outlook: Full-Year Shipments May Decline by Around 14%

Looking ahead to the remainder of 2026, the market outlook remains challenging. Counterpoint expects global smartphone shipments to decline by around 14% year-on-year for the full year, with memory shortages expected to persist until 2027. Manufacturers will prioritize profitability over shipment volume, cutting low-margin products, optimizing configurations and memory capacity mixes, and further relying on refurbished and previous-generation models to meet the needs of budget-conscious consumers. Supported by factors such as installment payments, brand ecosystem loyalty, and AI-driven retail experiences, the high-end trend is expected to remain relatively robust for the rest of the year.

IDC also noted that as vendors exhaust their early purchases of low-cost inventory materials, cost pressures will intensify in the second half of the year. It expects the year-on-year decline in China's smartphone market shipments to widen to around 20% in the second half of 2026. However, consumer demand for smartphones has not disappeared, and a market recovery is expected when the next replacement cycle arrives in 2028-2029. This, however, still hinges on substantial improvements in the memory supply environment.

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