Memory is too expensive: The global mobile phone market may shrink by 13% this year, with low-cost brands like OPPO, vivo, and Xiaomi calling for price increases

American analysis firm IDC predicts: global smartphone shipments may plummet to 1.12 billion units in 2026, the largest decline in a decade. AI data centers are taking memory capacity, causing low-end phone material costs to surge by 25%, and phones under $100 may disappear permanently.
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Table of Contents

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• The Root Cause: AI’s Greedy Appetite
• The Disappearance of $100 Low-Cost Phones
• This Is More Than Just Phones

Amid the AI wave, current 64GB DDR5 memory kits now cost over $500, more expensive than a PlayStation 5 (slim), with some manufacturers reporting cost increases of up to 500%! A supply chain tsunami spreading from data centers to consumer electronics is sweeping the globe.

This week, U.S. analysis firm IDC released its most pessimistic forecast yet: global smartphone shipments in 2026 are expected to reach only 1.12 billion units, a 12.9% drop from 1.26 billion last year, marking the largest single-year decline in ten years. Independent forecast from Counterpoint Research also predicts a 12% decline, calling it the steepest recession ever.

IDC Vice President of Global Customer Devices Francisco Jeronimo described:

What we are witnessing is not a temporary supply crunch, but a tsunami-like impact originating from the memory supply chain.

The Root Cause: AI’s Greedy Appetite

To understand this crisis, consider one number: manufacturing a high-bandwidth memory (HBM) chip requires three times the wafer capacity of traditional DRAM.

Samsung, SK Hynix, and Micron dominate 93% to 95% of the global DRAM market. When Microsoft, Google, Meta, Amazon, and other large-scale data center operators are bidding fiercely for HBM to feed AI models, these three companies are making rational business decisions: prioritizing enterprise-grade memory—far more profitable than consumer-grade products—by allocating limited space and capital expenditure accordingly.

OpenAI’s “Interstellar Gate” project exemplifies this squeezing effect. Samsung and SK Hynix have signed agreements aiming to increase monthly wafer capacity to 900,000 units, but almost all new capacity is directed toward AI servers.

Gartner analyst succinctly states: “Non-AI server users are secondary customers.”

Moreover, manufacturers are reluctant to significantly expand production, as the memory oversupply and losses in 2023 remain fresh in their minds, creating a deep psychological shadow. Although capital expenditure will increase in 2026, it will mainly be for technological upgrades rather than output expansion, resulting in very limited overall supply growth. Memory manufacturers have explicitly stated they will not ramp up capacity significantly in the second half of the year to avoid repeating the oversupply disaster.

The Disappearance of $100 Low-Cost Phones

The impact of this crisis varies greatly across different price segments.

Data shows that rising memory prices have significantly increased material costs for all phones: about 25% for low-end phones, 15% for mid-range, and 10% for flagship models. The low-end market is effectively doomed: a 25% cost increase is a fatal blow to already razor-thin profit margins.

IDC data indicates that last year, approximately 170 million smartphones were sold for under $100. But this market is now nearly unprofitable. IDC analyst bluntly states: “The era of affordable smartphones is over. Even if supply shortages ease, we do not expect memory chip prices to return to 2025 levels.”

China has felt this pressure first. Brands like OPPO, vivo, Xiaomi, iQOO, and Honor are planning new round of price adjustments in early March. Xiaomi’s 17 Ultra models have increased prices by 7% to 9%. Samsung’s Galaxy S26 base model in the U.S. now costs $899, up 4.7% from the previous generation, and the S26 Plus has risen 10% to $1,099.

IDC forecasts that the average selling price of smartphones will soar 14% this year, reaching a record high of $523. Manufacturers have no choice: either raise prices, cut unprofitable entry-level lines, or do both.

This Is More Than Just Phones

The impact of memory shortages extends far beyond smartphones, affecting the PC market as well.

Morgan Stanley has downgraded ratings for Dell, HP, and HPE, citing soaring server memory costs eroding profit margins. PC manufacturers are considering three strategies: raising prices directly, reducing memory capacity in shipments, or replacing with cheaper components—all of which mean consumers will pay more or accept worse experiences.

Game consoles, Chromebooks, and even automotive electronics face similar price hikes or component reductions.

Nabila Popal’s forecast is worth noting: “After this crisis, the smartphone market will undergo a radical transformation. Scale, average selling prices, and competitive landscape will all change dramatically. We believe this situation will not ease until at least mid-2027.”