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

A surge in demand for computers and data centers driven by artificial intelligence is leading to a significant shortage of RAM, causing memory prices to skyrocket. Analyst firm IDC forecasts that this shortage will result in a staggering 12.9% decrease in smartphone shipments this year, marking the most considerable drop in over a decade. Earlier predictions from IDC indicated that manufacturers would ship approximately 1.26 billion devices in 2025. However, this figure is now expected to fall to just 1.12 billion units in 2023. Nabila Popal, the senior research director at IDC’s Worldwide Quarterly Mobile Phone Tracker, emphasized that the ongoing memory crisis signifies more than a temporary setback; it represents a fundamental restructuring of the market that will reshape the total addressable market (TAM), vendor dynamics, and product offerings. According to Popal, the average selling price (ASP) of smartphones is projected to rise by 14% due to the memory shortage. “We anticipate that smaller manufacturers will exit the market, while lower-end vendors will experience sharp declines in shipments due to supply constraints and diminished demand at higher price points,” she stated. Although shipments are expected to reach a historic low, the ASP is anticipated to hit a record $523 this year. Popal also warned that rising component costs may render sub-$100 smartphones “permanently uneconomical,” making it increasingly challenging for manufacturers to produce devices at this price level. The analysis indicates that regions such as the Middle East and Africa could see shipments plummet by over 20% year-over-year, while markets like China and the Asia Pacific (excluding Japan and China) could face declines of 10.5% and 13.1%, respectively. RAM prices are expected to stabilize by mid-2027. In a previous study, Counterpoint also reported a decline in smartphone shipments, but its forecast indicated a more modest drop of only 2.6%. Earlier this year, Carl Pei, co-founder and CEO of Nothing, remarked that rising memory module costs would lead to higher smartphone prices in 2026. He noted that brands must now choose between significantly increasing prices—by 30% or more—or compromising on specifications. This shift is likely to shrink entry-level and mid-tier market segments by 20% or more, challenging brands that have traditionally dominated these categories.