Smartphone shipments fall as higher memory costs reshape market

Global smartphone shipments fell by 6 per cent year-on-year to 272 million units in the second quarter of 2026, as persistently high memory prices disrupted supply chains, raised component costs and forced manufacturers to overhaul pricing and product strategies, according to a new report by research firm Omdia. The research firm said the decline followed front-loaded demand in the first quarter of 2026, with the market subsequently entering an adjustment phase driven by the ongoing memory cost cycle. According to Omdia, the result has been an increasingly polarised smartphone market, where vendors’ performance depends more heavily on scale, supply chain resilience, pricing power and their exposure to lower-cost smartphones. Samsung retained its position as the world’s largest smartphone maker during the quarter, shipping 60.5 million devices, up 5 per cent from a year earlier, giving it a 22 per cent global market share. Omdia said Samsung’s vertically integrated memory business enabled the company to manage component shortages more effectively than many competitors. The delayed launch of the Galaxy S26 series also shifted premium demand into the second quarter, while Samsung gained additional market share in the entry-level segment as several Chinese rivals reduced their product ranges and increased prices. Apple recorded its strongest-ever second quarter, shipping 55.1 million iPhones, an increase of 23 per cent year-on-year, securing a record 20 per cent market share during what is traditionally the company’s weakest seasonal period. The report said distribution partners significantly increased inventories of the base iPhone 17 ahead of expected price increases and growing expectations that the upcoming iPhone 18 range will launch at higher prices, boosting shipments of the current generation. Although Apple has largely maintained stable iPhone prices despite industry-wide increases, Omdia said recent price adjustments across other Apple product categories during the latter part of the second quarter have raised the likelihood of iPhone price increases later this year. Xiaomi remained the third-largest smartphone vendor, shipping 31.2 million units, although volumes declined by 26 per cent compared with the same quarter of 2025. Omdia said Xiaomi was the most exposed among the top five manufacturers to rising memory costs, with more than half of its smartphone shipments priced below 200 US dollars. The company added that demand was particularly affected across emerging markets in the Asia-Pacific region and Latin America, where higher prices for entry-level devices weighed heavily on consumers. OPPO, including its realme and OnePlus brands, ranked fourth after shipping 28.4 million smartphones, down 17 per cent year-on-year. The company streamlined its three-brand portfolio and reduced the number of entry-level product variants in an effort to improve profitability. Vivo completed the top five manufacturers with 21.5 million shipments, representing a decline of 18 per cent from the previous year. Omdia said the first half of 2026 marked the beginning of a supply-driven reset for the global smartphone industry, as sustained increases in the cost of memory, storage and application processors fundamentally changed manufacturers’ priorities. Instead of pursuing shipment growth at all costs, smartphone vendors increasingly focused on protecting profit margins and average selling prices. Manufacturers adapted by selectively passing higher component costs on to consumers, exercising greater discipline over entry-level product portfolios and accelerating their shift towards mid-range and premium smartphones. These measures helped keep industry revenue comparatively resilient, despite weaker shipment volumes. The report also pointed to regional factors that contributed to the weaker global performance. In the Middle East, smartphone shipments fell by 18 per cent year-on-year, as heightened geopolitical tensions disrupted supply chains, retail activity and consumer demand. Unlike the broader cost pressures affecting the industry, Omdia expects these regional disruptions to prove temporary, with market conditions gradually stabilising during the second half of 2026. The company also believes that rising smartphone prices are reshaping long-term consumer behaviour. According to the report, as consumers become accustomed to paying more for smartphones, manufacturers have an opportunity to establish a structurally higher pricing framework, supporting higher average selling prices even after the current memory cost cycle comes to an end. Omdia described this as a structural repricing of the smartphone market, where profitability is increasingly taking precedence over shipment volumes. “Price is once again becoming a competitive differentiator,” said Le Xuan Chiew, Research Manager at Omdia. “The current memory cost cycle is driving a structural repricing of the industry, creating a lasting shift in how vendors compete on pricing, profitability and product positioning,” Chiew added. Looking ahead, Omdia said that although channel inventories have largely returned to normal levels, elevated component costs are expected to continue weighing on the smartphone market throughout the remainder of 2026 by limiting supply and keeping device prices high. While the pace of shipment declines is expected to ease following the sharp correction recorded in the second quarter, the company does not expect a broad-based recovery in shipment volumes until component costs begin to fall. At the same time, the changing market environment is creating new commercial opportunities for smartphone manufacturers. As consumers adjust to higher prices, vendors are expected to expand device financing options, increase trade-in and bundled offers, and grow services revenue in an effort to improve affordability while strengthening long-term customer relationships. Omdia said manufacturers are therefore expected to maintain disciplined shipment strategies, further streamline product portfolios and continue prioritising profitability over market share. The company added that industry revenue should remain comparatively resilient, as higher average selling prices and an improved product mix offset lower shipment volumes. However, it warned that downside risks remain if memory costs stay elevated for longer than anticipated or if macroeconomic conditions weaken further during the peak selling season. “Despite seasonal demand from flagship launches, holiday promotions and shopping festivals, smartphone shipments are expected to continue declining over the next two quarters amid persistent cost pressures,” said Amber Liu, Practice Leader at Omdia. “The winners will be vendors that combine pricing power, supply chain resilience and innovative commercial strategies to drive profitability, deepen customer relationships and emerge stronger as the market resets,” Liu added.