A recent report from the International Data Corporation (IDC) paints a bleak picture for the global smartphone market, predicting that 2026 will see its worst performance in over a decade. This sharp decline is attributed to an unprecedented crisis in memory chip prices, which will, in turn, lead to soaring production costs and record-high device prices for consumers.
General context: A market on the verge of transformation
This report comes at a time when the smartphone market is undergoing a transition. After years of explosive growth that brought smartphones to every corner of the globe, the market has reached saturation in many regions. The challenges have been compounded in recent years by the COVID-19 pandemic, which disrupted supply chains, followed by global inflation that has weakened consumer purchasing power. Now, a new crisis is looming, described by Francisco Jeronimo, vice president of IDC's hardware division, as not just a "temporary squeeze, but a massive, tsunami-like shock originating from the memory supply chain.".
Details of the crisis and its expected impact
According to IDC, smartphone shipments are expected to decline by 12.9% to 1.12 billion units this year. Even more concerning is the direct impact on prices, with the average selling price of smartphones projected to rise by 14% to a record high of $523. This increase will force manufacturers to pass on the rising costs to consumers at a time when demand is already weakening.
This downturn will severely impact manufacturers of low-cost Android devices, whose business models rely on slim profit margins. As component costs rise, these margins will erode, potentially forcing some smaller companies out of the market altogether. In contrast, Samsung and Apple appear better positioned to weather the shock, thanks to their focus on the premium segment and their ability to absorb some of the costs, which could allow them to gain additional market share.
The end of the era of budget phones?
One of the report's most striking warnings concerns the fate of the sub-$100 smartphone segment, representing approximately 171 million devices. Nabila Popal, research director at IDC, cautioned that this segment will become “permanently unviable” even after memory prices stabilize by mid-2027. This shift has serious international implications, particularly in emerging markets in Asia, Africa, and Latin America, where these devices serve as the gateway to the digital world for millions of users. The disappearance of this segment could slow the pace of digital inclusion and exacerbate the global digital divide.
Outlook: Slow recovery and a changing market
The outlook does not look promising for a swift recovery. IDC forecasts a modest rebound of 2% in 2027, followed by a stronger recovery of 5.2% in 2028. However, the firm indicates that the market is unlikely to return to its previous levels. The current crisis will not be a mere temporary downturn, but rather a “restructuring of the entire market,” leading to a new reality characterized by higher prices, greater dominance of large corporations, and increasing challenges for consumers with limited budgets.
