Global smartphone market set for record 13.9% decline as chip shortage deepens

Consumer electronics industry in turmoil

According to Главком: The worldwide consumer electronics sector is grappling with a severe downturn, driven by a shortage of memory chips and compounded by geopolitical unrest in the Middle East. According to research firm Counterpoint Research, the global smartphone market is headed for its steepest annual drop ever, with shipments forecast to reach just 1.08 billion units-a 13.9% decrease from the previous year. Earlier estimates in February had projected a smaller decline of 12.4%.

Factory operations have been disrupted by energy and logistics chain interruptions caused by military conflicts in Iran. Budget and mid-range brands have been hit hardest, including China's Transsion Holdings, whose shipment volumes are expected to fall by 32%. Xiaomi, a market leader, will see sales drop by 28%, while Honor anticipates losing around 20% of its annual volume.

Mounting challenges for smartphone makers

Meanwhile, low- and mid-tier smartphone manufacturers are struggling with rising costs and shrinking consumer purchasing power. As industry analyst Wang Yang explains:

'For many brands, the question is no longer how to increase shipments or gain market share-but whether they can survive in the market at all.'

Wang Yang

Amid these difficulties, Apple and Samsung have shown resilience. Apple reported record profits for the first three months of the year, and its shipment volumes for 2026 are expected to remain stable year-over-year. The company projects a 5% net growth next year. Samsung, meanwhile, faces a 4% annual decline in shipments.

In the first quarter, global wholesale prices for smartphones rose by 14%, signaling increasing market costs. Overall, gadget shipments fell by 3.1% year-on-year. As a result, models priced under $150 could disappear from the market, further complicating the situation for consumers. Chipmakers are also redirecting their production capacity toward chips for artificial intelligence (AI), which may affect the availability of components for smartphones.

Consequently, the global consumer electronics industry is confronting serious challenges that demand careful analysis and adaptation from manufacturers.

The issues facing the consumer electronics sector could have far-reaching consequences not only for producers but also for consumers, who may lose access to affordable smartphone models. As numerous brands fight to stay afloat, buyers could face limited choices and higher prices. Moreover, the shift by chipmakers toward AI component production may worsen the chip shortage, impacting all segments of the consumer electronics market.

As the smartphone market grapples with unprecedented challenges, the ripple effects on the semiconductor industry are becoming increasingly evident. Analysts predict that the ongoing issues may lead to significant shifts in pricing structures, particularly in the DRAM sector. For a detailed analysis of how the expansion of Chinese manufacturers could trigger major price fluctuations by 2027, read more about the anticipated impact on memory chip prices.