Global smartphone market faces record annual decline as chip crunch worsens

• Low-end smartphones priced below $150 are most affected, with some models likely to disappear as wholesale prices rose 14% in Q1 while shipments fell 3.1% year-over-year
• Budget-focused Transsion faces a projected 32% shipment drop, while Xiaomi and Honor are expected to decline 28% and 20% respectively
• Apple shipments are forecast to remain flat in 2026 then rise 5% in 2027, while Samsung is expected to post only a 4% decline, significantly outperforming the market average due to stable chip supply and stronger margins

Summary: Global Smartphone Market Faces Record Decline Amid Memory Chip Shortage

The global smartphone market is projected to contract 13.9% in 2025 to 1.08 billion units—the steepest annual decline on record—according to Counterpoint Research. This represents a downgrade from the February forecast of 12.4%, driven by an intensifying memory chip shortage as manufacturers shift production capacity toward AI-related chips.

Key Market Impact:

The shortage is hitting the budget segment hardest, with smartphones under $150 becoming uneconomical to produce and some models expected to disappear entirely. Global wholesale prices rose 14% in Q1 while shipments fell 3.1% year-over-year. Lower-tier manufacturers face cost pressures they cannot absorb while serving price-sensitive consumers.

Winners and Losers:

Premium brands demonstrate resilience. Apple posted positive Q1 results driven by iPhone 17 upgrades, with shipments expected to remain flat in 2026 before rising 5% in 2027. Samsung will outperform the market with only a 4% full-year decline, benefiting from stable chip supply and strong margins.

Budget-focused manufacturers face severe declines: Transsion is forecast to drop 32%, heavily exposed to sub-$150 devices. Xiaomi and Honor are projected to fall 28% and 20% respectively.

Market Outlook:

The chip shortage represents the industry's most severe supply-side disruption, with manufacturers unable to offset impacts through pricing or product adjustments. The crisis is fundamentally reshaping market dynamics, favoring premium players with stronger supply chains and margins while potentially eliminating entry-level segments entirely.

This contraction signals a significant market consolidation favoring established premium brands over value-focused competitors.