Smartphone vendors are bracing for a sharper‑than‑expected downturn in 2026 as Omdia forecasts a roughly seven percent year‑on‑year decline in global handset shipments, driven by tightening memory supply, elevated component costs, and mounting geopolitical tensions.
Based on Q1 memory‑price assumptions, the research firm highlights that memory now makes up a significantly larger share of the smartphone bill of materials (BOM), eroding vendor profitability, especially in entry‑level models.
Since Q4 2025, manufacturers have begun raising retail prices to preserve margins, a move that risks dampening demand in price‑sensitive emerging markets.
If memory prices remain elevated into H2 of 2026 due to tight supply and strong demand from AI‑server builds soaking up production capacity, the global smartphone contraction could stretch beyond 15 percent, surpassing the 12 percent slump seen in 2022.
Escalating geopolitical tensions in the Middle East could further destabilise the market by lifting energy and freight costs and triggering currency volatility, which would weigh on replacement cycles in developing regions.
Steepest decline
The steepest declines are expected to be in ultra‑low‑cost segments, with sub‑US$100 devices projected to fall by nearly 31 percent year‑on‑year in 2026 as thin‑margin vendors relying on LPDDR4X memory struggle with cost inflation and lower supply‑chain priority.
The US$100–399 volume band, which accounts for the bulk of global shipments, is also predicted to contract as rising memory prices push retail points upward, squeezing entry‑driven brands.
High-end growth
By contrast, smartphones priced above US$800 are expected to grow by about four percent in 2026, underpinned by stronger brand power and pricing flexibility. Apple’s dominant position in the high‑end and Samsung’s vertical‑integration advantages help both OEMs absorb component‑cost inflation and maintain more stable supply, although Samsung’s use of LPDDR4X in some models still exposes it to residual pressure.
“Vendors are already responding by simplifying product configurations and tightening BOM costs. At the same time, volatility in memory pricing is pushing brands toward shorter-term production planning and smaller order volumes, increasing operational pressure across the supply chain,” said Zaker Li, Principal Analyst of Omdia.
“In this environment, vendors will need to prioritise higher-value product innovation and disciplined production planning, while channel partners strengthen inventory management and demand forecasting to navigate slower replacement cycles and shifting consumer demand,” he added.
Entelechy Asia 