The global smartphone market is on track for its largest yearly decline ever recorded, with device shipments expected to fall 13.9% in 2026 to approximately 1.08 billion units, according to new projections released by Counterpoint Research.
The latest forecast represents a deterioration from the firm’s February estimate, which had anticipated a 12.4% annual decline. Analysts attribute the worsening outlook largely to escalating shortages of memory chips, a situation that has been further complicated by disruptions linked to the conflict involving Iran.
Lower-Cost Smartphones Face the Greatest Pressure
The effects of the supply crunch are proving particularly severe in the entry-level and mid-range smartphone categories.
As semiconductor manufacturers prioritize production of chips destined for artificial intelligence applications, fewer components are being allocated to lower-priced mobile devices. This shift has made budget smartphones increasingly difficult and less profitable to manufacture.
Counterpoint reported that average wholesale smartphone prices increased 14% during the first quarter, while overall shipments declined 3.1% from a year earlier.
The research firm expects pricing pressures to intensify as inventories accumulated before the supply disruption are gradually exhausted. As a result, certain smartphone models priced below $150 may eventually disappear from the market.
“Smartphone makers in the low and mid-tier are caught between cost increases they cannot absorb and consumers with limited spending power,” said Wang Yang, a principal analyst at Counterpoint, an independent research company that publishes quarterly smartphone shipment data.
“The question is no longer how to grow shipments or market share, but whether to remain in the market at all.”
Industry Faces Unprecedented Supply Challenges
According to Wang, the current memory chip shortage represents the most significant supply-side challenge the smartphone sector has experienced to date.
He noted that manufacturers have limited options for mitigating the impact, as higher costs cannot easily be offset through price increases or major product redesigns.
The shortage is placing considerable pressure on profitability across the industry, particularly among companies focused on value-oriented devices.
Premium Smartphone Segment Shows Greater Stability
While the lower end of the market is struggling, premium smartphone manufacturers have demonstrated greater resilience.
Apple (NASDAQ:AAPL) reported record revenue during the first quarter, supported by strong demand from customers upgrading to the iPhone 17 lineup.
Counterpoint expects Apple’s smartphone shipments to remain broadly unchanged during 2026 before increasing by approximately 5% the following year.
The company is viewed as being in a stronger position than many competitors due to its more stable access to components and higher profit margins, factors that could help it gain additional market share while limiting the need for significant price increases.
Samsung Positioned to Outperform the Broader Market
Samsung Electronics (USOTC:SSNHZ) also appears relatively well positioned amid the challenging environment.
The company maintained stable shipment volumes during the first quarter and is projected by Counterpoint to record a full-year decline of only 4%, significantly outperforming the overall market.
Analysts attribute Samsung’s resilience to its consistent product portfolio and comparatively secure supply chain.
Budget-Focused Brands Face Steeper Declines
Manufacturers with greater exposure to low-cost smartphones are expected to face much steeper contractions.
Counterpoint forecasts that Transsion, which derives a substantial portion of its business from devices priced below $150, could see shipments fall by 32% this year.
Meanwhile, Xiaomi and Honor are expected to record annual shipment declines of 28% and 20%, respectively, as the industry continues to grapple with supply constraints and weakening demand conditions.
The latest projections suggest that the combination of component shortages, higher production costs and cautious consumer spending is creating one of the most difficult operating environments the smartphone industry has faced in years.
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