Memory shortage could cause the biggest dip in smartphone shipments in over a decade

The increasing demand for AI-driven computing power is creating a significant shortage of RAM, leading to a drastic rise in memory prices. According to a recent forecast from analyst firm IDC, this shortage is expected to result in a staggering 12.9% decline in smartphone shipments this year, marking the largest drop in over a decade. Shortly after IDC's report, Counterpoint also projected a similar downturn, estimating a 12% reduction in the market. Earlier this year, IDC indicated that manufacturers had shipped 1.26 billion devices in 2025, but this number is anticipated to fall to just 1.12 billion in the current year. Nabila Popal, senior research director at IDC’s Worldwide Quarterly Mobile Phone Tracker, emphasized that this memory crisis signifies more than a temporary setback; it represents a fundamental shift in the market landscape. Popal stated that the shortage of memory components is likely to drive up the average retail price of smartphones by 14%, which could lead to a consolidation of the market as smaller players struggle to keep up. Low-end vendors are expected to see sharp declines in shipments due to both supply constraints and diminishing demand for higher-priced devices. Despite the overall decline in shipments, the average selling price (ASP) of smartphones is projected to reach a record high of $523 this year. Additionally, the impact of rising component costs may render sub-$100 smartphones unfeasible, pushing out manufacturers focused on that price bracket. The forecast indicates that regions like the Middle East and Africa could experience more than a 20% drop in shipments, while China and the wider Asia Pacific area (excluding Japan) are expected to see declines of 10.5% and 13.1%, respectively. IDC anticipates that RAM prices will stabilize by mid-2027. Counterpoint noted that premium smartphones may weather this change better than their budget counterparts, which are predicted to suffer a 20% dip in the sub-$200 segment. The repercussions of the memory shortage are expected to persist into the latter half of 2027, as it will take time for increased memory supply to become available. OEMs are already reacting to these challenges by delaying launches and adjusting specifications. Principal Analyst Yang Wang highlighted that certain Android manufacturers have already implemented price increases of 10% to 20% across their portfolios this January. Furthermore, the volatility in pricing is likely to boost the second-hand device market. Earlier this year, Nothing's co-founder and CEO Carl Pei warned that rising memory costs would lead to higher smartphone prices in 2026, indicating that brands must choose between significant price hikes or downgrading specifications. As a result, entry and mid-tier markets may shrink by over 20%, posing challenges for brands that have traditionally dominated these segments.