AI memory crunch to cause record smartphone sales crash

Global smartphone shipments are forecast to fall by 14% in 2026, marking the largest annual decline in the industry’s history, according to Counterpoint Research’s analysis in the GSMA’s State of Mobile Internet Connectivity 2026 report. The primary driver of this downturn is the sharp increase in memory chip prices, which have more than doubled between Q3 2025 and Q1 2026, then risen an additional 80-90% in Q2 2026. This surge is fueled by heightened demand from AI data centers for high-performance memory chips like LPDDR5x and DDR5, while manufacturers phase out older DDR4 memory chips that are still used in budget smartphones. Memory now constitutes nearly half of the component cost for sub-$200 phones, up from about a fifth in Q1 2025. For sub-$100 phones, which are critical in emerging markets, shipments are expected to drop by 36%, with Sub-Saharan Africa facing a decline of over 25% compared to 2025. The report highlights recent smartphone launches, such as Xiaomi’s Redmi A7, which saw a 40% price increase despite similar hardware to its predecessor, and Realme’s C71, which rose nearly 70% in price within a year. The GSMA notes that entry-level smartphones now cost 44% of the average monthly income for the poorest 20% of people in low- and middle-income countries, making affordability a major barrier to mobile internet access for 3.4 billion people worldwide who remain offline. The report warns that the AI-driven memory demand will continue to push prices higher, risking the GSMA’s 2025 initiative to bring $40 4G smartphones to market in Africa. Without intervention, this trend could deepen digital divides, particularly in regions heavily reliant on budget devices. The GSMA emphasizes the need for measures to protect the supply of low-cost devices for first-time buyers to prevent further entrenchment of digital inequality.