Phone slump deepens under chip strain

Global smartphone shipments fell in the first quarter, ending the run of growth that had followed the sector’s rebound from its 2023 downturn, as a squeeze in memory supply and higher component prices forced brands to trim volumes, raise prices and rethink launch plans. IDC said worldwide shipments declined 4.1 per cent in the January-March period, while Samsung and Apple were the only top-five vendors to post growth.

The setback marks an early sign that 2026 is shaping into a far more difficult year for handset makers than many had expected at the end of last year. IDC had already warned in February that the market could suffer its sharpest annual contraction on record this year, with shipments forecast to fall 12.9 per cent to about 1.12 billion units as AI infrastructure spending by major technology groups absorbs a large share of global memory-chip supply and pushes up costs for consumer electronics.

At the centre of the squeeze is DRAM and NAND flash, both essential to smartphones. Prices have surged as data-centre operators and cloud groups race to secure memory for AI servers, leaving handset makers competing for tighter supply. The pressure has been especially severe for lower-priced Android models, where margins are thin and brands have less room to absorb cost increases. IDC said limited memory availability and record-high prices were pushing phone makers to reduce shipments and lift retail prices, which in turn dampened demand.

Other researchers are seeing the same pattern, though the scale differs. Counterpoint Research estimated that global smartphone shipments fell 6 per cent in the first quarter, also blaming shortages of memory components and softer demand. It said Apple led the market for the first time in a first quarter, with a 21 per cent share and 5 per cent shipment growth, while Samsung ranked second with 20 per cent and a 6 per cent decline in volumes. Xiaomi, Oppo and Vivo remained in the top five but faced pressure from weaker mass-market demand and rising costs.

IDC’s preliminary figures paint a slightly different picture on leadership, with Samsung and Apple both growing while the overall market shrank 4.1 per cent. Even with the variation between trackers, the direction is the same: premium brands are proving more resilient than manufacturers exposed to the entry-level segment. That shift is important because it suggests the industry is not only facing a cyclical slowdown, but also a structural change in which very cheap smartphones become harder to sustain. IDC said earlier this year that sub-$100 devices may become permanently unviable even after memory prices stabilise.

Apple’s relative strength has come from its ability to manage supply chains tightly and pass on some costs to consumers without the same volume hit faced by rivals. Reuters reported last week that strong demand for the iPhone 17 range helped Apple lead global shipments in Counterpoint’s first-quarter tally even as the broader market contracted. Samsung, by contrast, was hit by weakness in lower-priced models and by the delayed launch of the Galaxy S26 series, though early demand for its top-end Ultra model has been described as solid.

The reference to war involving Iran, highlighted in some coverage of the market decline, appears to be less a direct cause of the smartphone downturn than an added pressure on sentiment, logistics and energy costs. Reuters reporting on China’s trade and growth outlook this week said the conflict in the Middle East, especially disruption linked to Iran and the Strait of Hormuz, has raised transport and input costs and weakened global demand. In handsets, that matters because higher fuel bills, shipping uncertainty and a more cautious consumer backdrop can intensify a downturn that was already underway because of memory inflation.

For consumers, the immediate effect is likely to be higher prices, fewer aggressive discounts and a narrower range of ultra-low-cost devices. For brands, the challenge is sharper: either preserve margins by pushing up average selling prices or chase volumes in a market where cost inflation is eroding profitability. Reuters reported in February that IDC expected average smartphone selling prices to climb 14 per cent this year to a record $523 as manufacturers pivot to more expensive models.

There are signs that the memory market may eventually ease, but not enough yet to relieve handset makers in the near term. Spot prices for some DRAM products have started to edge down from extreme highs, though contract prices remain elevated and analysts still expect steep increases for DRAM and NAND in the current quarter. That suggests the second quarter could stay difficult for smartphone vendors, particularly those reliant on high-volume budget sales in Asia, Africa and Latin America.