Surge in Memory Chip Prices Threatens Global Smartphone Market

The global smartphone market is facing a significant downturn, with projections indicating a 12.9% decline in shipments for 2026, marking the largest drop in over a decade. This decline is primarily attributed to a surge in memory chip prices, which have increased by 80% to 90% in the first quarter of 2026 due to a supply shortage. The International Data Corporation (IDC) has reported that this crisis is not merely a temporary issue but a "tsunami-like shock" affecting the entire market, particularly impacting low-end Android manufacturers.

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Xiaomi, the third-largest smartphone manufacturer globally, recently launched its flagship models, the Xiaomi 17 and 17 Ultra, priced at 999 euros ($1,179) and 1,499 euros, respectively. Despite the rising costs of memory chips, Xiaomi has opted to maintain the pricing of these devices compared to last year's models. Analysts suggest that while Xiaomi's premium devices may withstand some of the price pressures, the bulk of its revenue comes from mid-range devices, which could see a decline in demand as prices rise.

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Francisco Jeronimo, a vice president at IDC, noted that Xiaomi's limited presence in the premium segment makes it vulnerable, as it cannot rely on high-margin products to offset losses in lower-tier devices. This situation is compounded by a reported 3% year-on-year decline in smartphone revenue for Xiaomi in the September quarter, although its electric vehicle business has seen a nearly 200% surge in sales, providing a crucial revenue stream amid the memory crisis.

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The IDC forecasts that the average selling price of smartphones will increase by 14% to a record $523 in 2026, as manufacturers shift focus towards higher-margin models to counteract rising component costs. This shift is likely to benefit established players like Apple and Samsung, who are better positioned to absorb these costs and maintain market share, while smaller competitors may struggle or exit the market entirely.

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Nabila Popal, senior research director at IDC, warned that the sub-$100 smartphone segment, which accounts for 171 million devices, may become "permanently uneconomical" even after memory prices stabilize by mid-2027. A modest recovery of 2% is expected in 2027, followed by a 5.2% rebound in 2028, but the market is unlikely to return to its previous state.

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Xiaomi has acknowledged the challenges posed by rising memory prices and the overall market decline. The company remains focused on its electric vehicle segment as a vital source of revenue during this period of uncertainty. IDC's Jeronimo emphasized the structural reset of the smartphone market, indicating that the current crisis will have lasting implications.

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Critics argue that the memory chip crisis highlights the vulnerabilities of companies heavily reliant on budget devices. As prices rise, these manufacturers may be forced to pass costs onto consumers, further diminishing demand. The situation raises concerns about the long-term sustainability of the smartphone market, particularly for lower-tier brands.

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• “What we are witnessing is not a temporary squeeze, but a tsunami-like shock originating in the memory supply chain,” — Francisco Jeronimo, Vice President, IDC

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• “The memory crisis will cause more than a temporary decline; it marks a structural reset of the entire market,” — Nabila Popal, Senior Research Director, IDC

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