The worldwide smartphone industry is expected to experience its sharpest annual decline on record, with shipments forecast to fall 13.9% to 1.08 billion units this year, according to updated estimates from Counterpoint Research.
The revised outlook is weaker than the firm’s February projection of a 12.4% decline and reflects increasing pressure from a worsening shortage of memory chips, compounded by disruptions linked to the conflict in Iran.
Entry-Level Devices Bear the Brunt of the Shortage
Budget smartphones are facing the greatest challenges as semiconductor producers redirect manufacturing capacity toward higher-value AI-related components.
This shift has reduced the availability of chips for lower-cost handsets and significantly increased production costs across the segment.
During the first quarter, average smartphone wholesale prices rose 14%, even as global shipments fell 3.1% compared with the same period last year.
Counterpoint expects the imbalance between supply and demand to become more visible as pre-existing inventories are depleted, potentially forcing some smartphones priced below $150 out of the market altogether.
“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.”
Manufacturers Have Limited Options to Respond
Wang described the memory chip shortage as the most severe supply disruption the smartphone sector has encountered.
According to the analyst, companies have few practical ways to offset rising component costs, as significant price increases risk hurting demand while product modifications offer limited relief.
As a result, many manufacturers are facing mounting pressure on both margins and volumes.
Premium Brands Continue to Show Resilience
Higher-end smartphone makers have largely weathered the disruption more successfully.
Apple (NASDAQ:AAPL) reported record first-quarter revenue, supported by strong demand for its iPhone 17 family of devices.
Counterpoint expects Apple’s shipment volumes to remain stable in 2026 before growing by around 5% the following year.
The company’s stronger margins and more secure supply arrangements are expected to help it defend pricing and potentially capture additional market share.
Samsung Expected to Hold Up Better Than Rivals
Samsung Electronics (USOTC:SSNHZ) is also forecast to outperform much of the industry.
After maintaining steady shipment volumes during the first quarter, the company is projected to record a full-year decline of just 4%, substantially less severe than the broader market contraction.
Its diversified product lineup and relatively stable supply chain are viewed as key advantages.
Chinese Smartphone Brands Face Significant Headwinds
Brands with greater exposure to the budget segment are expected to encounter more substantial declines.
Counterpoint forecasts a 32% drop in annual shipments for Transsion, reflecting its strong dependence on devices priced below $150.
Meanwhile, Xiaomi and Honor are projected to see shipments decline by 28% and 20%, respectively.
With component shortages persisting and consumers becoming increasingly price sensitive, the smartphone market appears set for one of its most difficult years on record.
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