Omdia: Memory crunch and geopolitics could trigger a 15 percent smartphone decline, with cheapest handsets hit hardest

Global smartphone shipments are expected to fall about 7 percent year over year in 2026, according to new data from Omdia. The research firm says rising memory costs and geopolitical pressures are creating issues that could weigh on demand, particularly in lower-priced segments.

Omdia’s forecast is based on first-quarter memory price assumptions, which suggest pricing pressure and supply constraints could begin to ease in the second half of the year. Even so, the market faces mounting cost challenges as memory takes up a larger share of a smartphone’s bill of materials.

Omdia’s warning

Tighter memory supply and elevated pricing are increasing cost pressure for vendors. Omdia says that this is eroding profitability, especially for entry-level devices where margins are already thin.

Since the fourth quarter of 2025, smartphone manufacturers have begun raising retail prices to protect margins. That sustained price increases could weaken demand, particularly in price-sensitive emerging markets.

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If memory prices continue rising into the second half of 2026, driven by tight supply and growing AI server demand locking in production capacity, vendors could face further cost escalation across both entry-level and premium devices.

Geopolitical tensions in the Middle East add another layer of risk, and could result in increased energy prices, freight costs, and foreign exchange volatility, further weakening consumer upgrades, especially in sensitive markets.

Under that scenario, global smartphone shipments could decline by more than 15 percent in 2026. That would exceed the 12 percent drop recorded in 2022.

“Rising memory costs and macro headwinds are expected to impact smartphone demand unevenly across price segments. Devices priced below $100 are forecast to decline by nearly 31 percent year-on-year in 2026, reflecting the severe margin pressure vendors face in ultra-low-cost segments, which are highly sensitive to even modest shifts in the macroeconomic environment,” said Zaker Li, Principal Analyst at Omdia.

“Smartphones in the $100–$399 range, which represent the core volume bands of the global market, are also expected to contract as rising memory prices push retail prices upward in price-sensitive markets. These segments are largely served by entry-focused vendors that rely heavily on LPDDR4X memory, operate with thin margins, and often have lower priority in the memory supply chain, leaving them more exposed to cost inflation and potential supply shortages. As a result, vendors concentrated in these price tiers are expected to face production constraints and shipment reductions, with many projected to experience double-digit declines in 2026.”

There’s some good news for buyers of higher priced models. “In contrast, the premium segment is expected to remain relatively resilient despite rising component costs. Devices priced above $800 are forecast to grow by around 4 percent in 2026, supported by stronger brand positioning and greater pricing flexibility,” Li said.

“Apple maintains a dominant presence in the high-end market and benefits from strong supply chain relationships and higher margins that help absorb component cost inflation. Samsung also benefits from vertical integration and internal semiconductor capabilities, which provide greater security of supply and priority access to key components. While Samsung still utilizes LPDDR4X in some models and faces similar cost pressures, its supply chain advantages reduce the risk of significant shortages.”

Li went into further detail, explaining:

The evolving cost environment is reshaping dynamics across the global smartphone supply chain,” added Li. “As entry-level smartphone demand weakens, suppliers of mid- and low-end components, including chipsets, camera modules, and other key parts, are likely to face declining orders and intensified pricing 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. Smaller ODMs and specialized component suppliers will also face growing consolidation risks as margins compress and demand becomes more concentrated among leading brands. In this environment, vendors will need to prioritize 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.

What do you think about Omdia’s smartphone shipment forecast for 2026? Let us know in the comments.