Global smartphone shipments fell sharply during the second quarter of 2026 as expensive memory components forced manufacturers to raise prices, reduce entry-level product lines and prioritise profitability over sales volume.
Final figures from Omdia’s global smartphone market report show that manufacturers shipped 272 million smartphones during the quarter, representing a six percent decline from the same period in 2025. The result followed stronger, front-loaded demand during the first quarter, when vendors and distributors attempted to secure inventory before component costs increased further.
Although the headline is frequently described as a decline in smartphone sales, Omdia’s figures measure shipments from manufacturers into distribution channels. The two measurements are closely connected, but shipments can also be influenced by retailer inventory, production schedules and expectations about future price changes.
The decline reveals how the global artificial intelligence investment boom is affecting everyday consumer electronics. Memory manufacturers are directing more production towards highly profitable data-centre components, leaving phone makers to compete for a more limited supply of conventional smartphone memory.
Why Memory Prices Are Disrupting the Smartphone Market
Every modern smartphone relies on DRAM for running applications and NAND flash memory for storing photos, videos, software and other data. When the price of these components rises, the cost of manufacturing each device increases.
The current shortage is being driven partly by rapid investment in AI infrastructure. Data centres operating large AI models require enormous amounts of high-bandwidth memory and high-capacity enterprise components. According to IDC’s analysis of the global memory shortage, leading suppliers have shifted manufacturing resources towards higher-margin memory for AI servers instead of expanding the conventional DRAM and NAND supply used by smartphones and personal computers.
IDC describes the change as more than a temporary mismatch between supply and demand. Samsung Electronics, SK Hynix and Micron are allocating significant capital and manufacturing capacity to enterprise memory because major technology companies are building increasingly powerful AI data centres.
That decision creates a difficult trade-off. Production capacity assigned to high-bandwidth memory cannot simultaneously produce the low-power mobile memory required for affordable Android phones. IDC expected DRAM supply to grow by 16 percent in 2026 and NAND supply by 17 percent, both below historical growth levels.
Affordable Smartphones Are Taking the Biggest Hit
The pressure is most severe at the lower end of the market. Manufacturers selling inexpensive phones normally operate with limited profit margins, leaving them little room to absorb a sudden increase in component costs.
Research published by Omdia on smartphones priced below $400 found that memory represented nearly 60 percent of the bill of materials for sub-$400 devices during the first quarter of 2026. For phones priced below $99, the share exceeded 64 percent.
Manufacturers can attempt to reduce costs by selecting less expensive displays, camera sensors, processors or wireless components. However, budget devices are already built around heavily optimised specifications, so there are fewer areas where meaningful savings can be made without damaging the user experience.
As a result, companies are raising retail prices, removing certain models or reducing the memory and storage offered at familiar price points. Omdia expects smartphone shipments below $400 to fall by more than 22 percent during 2026, while devices priced above $400 are forecast to grow by 5.7 percent.
This means buyers may find fewer competitive phones in the most affordable categories. A price range that previously included several 5G devices with generous storage could offer fewer choices or models with older processors and more limited hardware.
Samsung and Apple Are Gaining Market Share
The downturn has not affected every manufacturer equally. Companies with stronger supply chains, premium product portfolios and greater purchasing power are performing considerably better than brands dependent on high-volume budget sales.
Samsung remained the largest global smartphone manufacturer during the second quarter, shipping 60.5 million devices and capturing 22 percent of the market. Its shipments increased by five percent compared with the previous year. Omdia said Samsung’s vertically integrated memory operations helped it manage supply shortages more effectively than many competitors.
Apple recorded its strongest second quarter to date, shipping 55.1 million iPhones. That represented annual growth of 23 percent and gave the company a record 20 percent share during a quarter that is traditionally weaker for iPhone demand.
Apple also benefited from keeping iPhone prices relatively stable while several competing brands introduced increases. Distributors reportedly built inventory of the base iPhone 17 ahead of expected future price changes and the possibility of more expensive iPhone 18 models. The complete manufacturer comparison is available within Omdia’s final second-quarter results.
Large brands can negotiate long-term component contracts, secure supply earlier and spread costs across premium devices and services. Those advantages make it easier to protect margins without immediately withdrawing from important markets.
Chinese Smartphone Brands Face Greater Pressure
Xiaomi remained the world’s third-largest smartphone manufacturer, but its shipments fell 26 percent year over year to 31.2 million units. More than half of Xiaomi’s shipments were priced below $200, leaving the company particularly exposed to memory inflation in emerging markets.
OPPO, including realme and OnePlus, shipped 28.4 million phones, representing a 17 percent annual decline. Vivo completed the top five with 21.5 million shipments, down 18 percent. Several brands have responded by reducing the number of entry-level models they sell and concentrating marketing resources on more profitable products.
The problem is especially serious in regions where consumers purchase devices outright rather than through long-term carrier financing. Even a relatively small retail price increase can significantly reduce demand in price-sensitive markets across Asia, Africa and Latin America.
Manufacturers therefore face a difficult decision. Maintaining low prices can destroy already narrow margins, while passing higher costs to buyers can reduce demand and weaken the brand’s position in markets built around affordability.
Smartphone Prices Could Continue Rising
The six percent quarterly decline may be only one stage of a broader market contraction. Gartner’s 2026 device forecast projected that worldwide smartphone shipments would decline by 8.4 percent for the full year. It also estimated that combined DRAM and storage prices could rise by 130 percent, contributing to a 13 percent increase in smartphone prices compared with 2025.
IDC issued an even more severe forecast, predicting that annual smartphone shipments could fall 12.9 percent to 1.12 billion units. The research company expected the industry’s average selling price to rise 14 percent to a record $523 as manufacturers move towards higher-margin products.
Forecasts differ because memory prices, production allocations and consumer demand are changing rapidly. However, the major research firms agree that inexpensive smartphones will face the greatest pressure and that buyers are likely to keep existing devices for longer.
Consumers May Turn to Refurbished Phones and Financing
Higher prices could change how people purchase and replace smartphones. Buyers unable to afford a new device at the expected price may repair their current phone, purchase a refurbished model or delay upgrading until component costs decline.
Omdia expects manufacturers and retailers to respond by expanding trade-in programmes, instalment plans, carrier bundles and service-based offers. These options can reduce the immediate cost to consumers while allowing brands to protect higher retail prices and increase long-term customer value.
Premium buyers may be less affected because an increase in memory cost represents a smaller percentage of an expensive phone’s total manufacturing cost. Budget buyers, by contrast, may experience a much larger percentage increase or lose access to certain models entirely.
The result could be a more divided smartphone market. Premium devices may continue receiving improved cameras, processors and AI features, while affordable models experience slower specification upgrades or even reductions in memory and storage.
The Market Is Shifting From Volume to Profitability
For many years, smartphone manufacturers competed by shipping as many devices as possible and rapidly expanding into new markets. The memory crisis is forcing a different strategy.
Omdia says the industry is moving from maximising shipment volumes towards protecting margins and average selling prices. Manufacturers are simplifying product ranges, becoming more disciplined about inventory and focusing on customers who can support higher prices.
This shift could remain in place even after memory supply begins to improve. Once buyers become accustomed to higher prices, manufacturers may have little incentive to return immediately to previous pricing levels. Brands could instead use the improvement in component costs to restore margins or fund more expensive AI and camera features.
The six percent decline therefore represents more than one weak quarter. It shows how the AI infrastructure boom is redirecting semiconductor resources, increasing the cost of consumer technology and changing which smartphone companies are best positioned to compete.
Apple and Samsung are benefiting from scale, supply agreements and premium demand. Brands more dependent on affordable Android phones are facing shrinking product ranges and increasingly difficult pricing decisions. For consumers, the immediate consequences are likely to include higher prices, longer replacement cycles and fewer attractive choices at the lowest end of the market.
