Global Smartphone Market Faces Record Decline as Chip Shortages Deepen
By Che Pan and Casey Hall
Smartphone Market Contraction and Chip Shortage Impact
BEIJING, June 1 (Reuters) - The global smartphone market is heading for its steepest annual contraction on record, with shipments projected to slump by 13.9% this year to 1.08 billion units, Counterpoint Research said on Monday, citing a worsening shortage of memory chips.
The forecast is a downgrade from the 12.4% decline projected in February, with the squeeze in global chip supply exacerbated by the Iran war.
Impact on Budget Smartphones
Acute Effects on Lower-End Devices
IMPACT MOST ACUTE AT BUDGET END OF MARKET
The impact is being felt most acutely in lower-end smartphones as chipmakers shift production capacity to AI-related chips, making entry-level devices less economical to produce.
Price Increases and Shrinking Availability
Global smartphone wholesale prices rose 14% in the first quarter while shipments fell 3.1% year on year. That trend is expected to continue as inventory built before the supply shock becomes depleted, with some models priced below $150 likely to disappear from the market.
"Smartphone makers in the low and mid-tier are caught between cost increases they cannot absorb and consumers with limited spending power," said Wang Yang, a principal analyst at Counterpoint, an independent research company that publishes quarterly smartphone shipment data.
"The question is no longer how to grow shipments or market share, but whether to remain in the market at all."
Severity of Memory Chip Shortage
The memory chip shortage is the most severe supply-side disruption the smartphone industry has faced, Wang said, adding that manufacturers are unable to offset the impact through pricing or product changes.
Resilience in the Premium Market Segment
Apple and Samsung Performance
PREMIUM END OF THE MARKET MORE RESILIENT
The premium segment has proven more resilient. Apple posted record revenue for the first three months of the year, helped by customers upgrading to its iPhone 17 series. Apple's 2026 shipments are expected to remain flat before rising 5% next year, Counterpoint projections show.
With more stable chip supply and stronger margins than many rivals, Apple is well placed to gain market share and could face less pressure to raise prices.
Samsung Electronics kept volumes steady in the first quarter and is expected by Counterpoint to register only a 4% decline in shipments over the full year, outperforming the wider market thanks to stable supply and a consistent product line-up.
Challenges for Budget-Focused Brands
Transsion, which is heavily exposed to the market for smartphones priced below $150, is forecast to suffer a 32% drop in shipments this year. Rivals Xiaomi and Honor, meanwhile, are projected to post full-year declines of 28% and 20% respectively, Counterpoint said.
(Reporting by Che Pan and Casey HallEditing by David Goodman)
