The AI spending boom produced an unexpected casualty: the global smartphone market.
Global smartphone shipments fell 11% year over year in the second quarter of 2026, the lowest ever since 2013. Counterpoint attributed much of the slowdown to memory suppliers shifting more production toward higher-margin AI demand, which pushed up DRAM and NAND prices for smartphone makers.
Despite the decline in shipments, certain brands still reported positive metrics. Counterpoint Research reported that Samsung holds the top market share, while Apple bucked the trend with a slight but noticeable growth in shipments while maintaining a sizable market share.
This reflects stronger demand for premium smartphones.
The collision of two sectors
The smartphone market’s latest slowdown began in AI data centers, not with smartphones, where booming demand for computing hardware has increased competition for the memory chips that power everything from graphics processors to mobile devices.
Counterpoint Research said memory suppliers responded by allocating more production to AI companies, reducing the supply of DRAM and NAND chips used in smartphones. That reallocation has left smartphone manufacturers with difficult choices: absorb higher component costs, pass them on through higher prices, or look for savings elsewhere in the production process.
Those pressures began to translate into real-world effects. Counterpoint Research cited that consumers have responded by holding on to their existing devices longer. At the same time, some have increasingly turned to the pre-owned market rather than buying new handsets, contributing to the weakest second-quarter smartphone shipments.
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An uneven spread of market effects
While the global smartphone market recorded an 11% year-over-year decline in shipments during the second quarter, the slowdown was not evenly distributed. Counterpoint said the greatest pressure fell on the budget and mid-range segments, where manufacturers have far less room to absorb rising component costs without increasing prices.
Separate supply-chain analysis from Omdia estimates that DRAM and NAND now account for roughly 60% of the bill of materials for smartphones priced below $400, rising to more than 64% for devices under $99.
With memory making up such a large share of production costs, manufacturers of lower-cost smartphones have faced greater pressure than those competing in the premium market. Specifically, brands like Xiaomi, Oppo, and Vivo recorded some of the steepest declines in shipments.
Samsung emerged as the world’s largest smartphone vendor with a 24% market share, although its shipments were also impacted. Apple, meanwhile, reversed the downturn with a 3% increase in shipments, trailing Samsung at 20% market share.
The memory crunch may not ease anytime soon
Even if consumer demand stabilizes, smartphone manufacturers may continue to face higher production costs. The result will ultimately fall on consumers who may continue to hold on to their old devices or consider refurbished alternatives, as replacing a smartphone remains an expensive decision.
That dynamic reflects a broader shift in the semiconductor industry. Rather than responding primarily to smartphone demand, memory production is increasingly influenced by the rapid expansion of AI computing, which offers significantly higher profitability.
Related News: Apple is reportedly scaling back some iPhone 17 production as rising memory costs fueled by AI demand continue to pressure smartphone margins.
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