2026 Smartphone Market Forecast Component Costs Driving Global Decline
The smartphone market will experience a global downturn which will start in 2026 after showing slight recovery during the previous year. The TrendForce report shows that the industry is now entering a decline phase because chip shortages combined with rising memory component prices serve as the main cause of this downturn. The factors mentioned above drive two significant outcomes which affect manufacturer profit margins and the pricing structure used by retailers.
The analysts predict that global shipments will decrease by 10% during 2026 which will result in approximately 1.135 billion units being transported. The TrendForce report presents a worst case prediction of the situation. Shortages combined with chip price hikes will result in a 15% reduction which will bring annual volume down to approximately 1.061 billion units. The current situation represents a complete turnaround from 2025 because shipments increased from 1.24 billion to 1.26 billion units while that year recorded 2% growth.
The market transition occurs because internal component expenses present the highest financial burden for manufacturers. Manufacturers now spend more money on RAM and storage modules because these components make up a higher percentage of a smartphone's bill of materials (BOM) than before. The historical data shows that these components used to account for 10 15% of total expenses but now account for 30 40% of expenses.
- Increased Production Costs: The price manufacturers pay for standard configurations which include 8 GB of RAM and 256 GB of storage has increased to almost double its cost from the previous year.
- Reduced Profitability: The rising costs of production create a challenge for manufacturers who must decide between maintaining their production levels or suffering financial losses.
The price of products will increase for customers during 2026. Retailers must respond to increased operational expenses by either increasing product prices or making adjustments to their product designs. Some manufacturers may choose to create basic models which come with reduced memory options as a means of maintaining affordable pricing.
The impact will not be felt equally across all brands. Analysts highlight two companies with distinct advantages:
- Samsung: Samsung's memory manufacturing position allows the company to produce its own components which helps them control supply chain operations while maintaining stability against market price changes and product shortages.
- Apple: The strong brand loyalty which Apple has built enables the company to handle price increases better than its rivals because Apple customers do not react strongly to average price hikes.
The smartphone industry will make a transition from growth to cost management during 2026 according to its future projections. The previous year showed market stability but supply chain shortages combined with doubled memory costs will create a new market environment which favors companies that rely on vertical integration and strong brand equity.
