As upstream semiconductor manufacturers prioritize production capacity for high-end components required in AI data center construction, shortages of critical memory chips for consumer devices are driving up production costs and suppressing shipment growth.
According to a recent report by industry tracker Counterpoint Research on December 16, global smartphone shipments are projected to decline by 2.1% in 2026. This forecast not only reverses this year’s estimated growth of 3.3% but also falls significantly below the previously anticipated marginal increase of 0.45%. Meanwhile, driven by a surge in total component costs of 10% to 25%, the global average selling price (ASP) of smartphones is expected to rise by 6.9% in 2026.
Analysts attribute this market disruption to bottlenecks in the semiconductor supply chain. To meet the expansion demands of AI data centers, chipmakers are prioritizing advanced memory chips for Nvidia accelerators, leading to tight supplies of dynamic random-access memory (DRAM) used in laptops, home appliances, and smartphones.
Market polarization is set to intensify, as manufacturers’ ability to absorb cost shocks varies due to differing profit margins. Counterpoint notes that Apple and Samsung possess stronger risk resilience to weather challenges in the coming quarters.
**Chip Shortages Drive Up Bill of Materials Costs** The ongoing global expansion of data centers has boosted demand for Nvidia systems, subsequently consuming production capacity at major memory chip suppliers like SK Hynix and Samsung.
While this demand is primarily concentrated in the server sector, the shortage of critical DRAM components has spilled over into the smartphone industry. With demand outstripping supply, DRAM prices have surged significantly this year.
Counterpoint data shows that for low-end smartphones priced below $200, the bill of materials (BoM) cost has risen by 20% to 30% since the beginning of the year. Mid-to-high-end smartphone material costs have also increased by 10% to 15%.
This cost escalation shows no signs of peaking. Counterpoint Research Director MS Hwang stated in the report that memory chip prices could rise another 40% by Q2 2026, pushing BoM costs up by an additional 8% to 15% from current highs.
These rising component costs are likely to be passed on to consumers, directly driving up device ASPs.
**Manufacturer Strategies and Market Polarization** Facing cost pressures, consumer electronics manufacturers are adjusting their strategies.
In recent months, companies like Xiaomi have warned of potential price hikes, while others such as Lenovo have begun stockpiling memory chips to mitigate cost increases.
Counterpoint suggests some firms may steer consumers toward higher-end models with better profit margins or adopt cost-cutting measures, such as reusing older components, downgrading camera modules, displays, or audio equipment, and selling devices with reduced memory.
MS Hwang noted that Apple and Samsung are best positioned to navigate challenges in the coming quarters, while manufacturers with less flexibility between market share and profitability will face significant difficulties.
Counterpoint emphasized that the memory chip deficit could hit entry-level smartphones particularly hard.
Beyond smartphone makers, Nintendo’s stock also declined in December amid concerns that supply chain issues could impact the profitability of its flagship Switch 2 console.
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