The escalating demand for computers and data centres to support artificial intelligence (AI) has led to a significant shortage of RAM, causing memory prices to surge sharply. In response, IDC has forecasted that smartphone shipments will decline by 12.9% this year, marking the steepest annual drop in over ten years. Shortly after, Counterpoint echoed these concerns, estimating a 12% decrease in the market.
Earlier in the year, IDC reported that manufacturers had shipped 1.26 billion smartphones in 2025, but this number is expected to fall to just 1.12 billion in the current year. Nabila Popal, IDC’s senior research director, remarked that the memory shortage signifies not just a temporary setback but a structural transformation within the market that would reshape the long-term total addressable market (TAM), vendor landscape, and product offerings.
Due to the RAM crisis, the average retail price of smartphones is anticipated to increase by 14%. Popal pointed out that this situation could lead to market consolidation, with smaller manufacturers likely to exit and budget-friendly vendors facing sharp declines in shipments as consumer demand for higher-priced models grows. Despite a substantial drop in shipments, the average selling price (ASP) of smartphones is projected to rise to a record $523 this year. Furthermore, mounting component costs could render sub-$100 smartphones economically unviable, potentially driving manufacturers out of this price segment.
The situation appears dire for the Middle East and Africa, where shipments could fall over 20% year on year. Similarly, declines of 10.5% and 13.1% are expected in China and the Asia-Pacific region (excluding Japan), respectively. IDC has suggested that RAM prices may stabilise by mid-2027, while Counterpoint notes that premium smartphones may better withstand these changes than those priced below $200, which are likely to experience a 20% drop.
Yang Wang, a Principal Analyst at Counterpoint, highlighted that the effects of the memory shortage will persist into the second half of 2027, as it will take several quarters for supply to catch up with demand. Lower-end smartphone options will be particularly impacted due to a faster-than-expected decline in LPDDR4 supply. This shortage has already prompted several OEMs to delay launches and trim product lines.
Market fluctuations are also projected to boost the second-hand device market, as the rising costs of smartphones compel consumers to stay within their budgets. Carl Pei, co-founder of Nothing, warned that smartphone prices are likely to increase in 2026 as manufacturers face the dilemma of either raising prices significantly or downgrading specifications. He emphasised that the previous paradigm of offering “more specs for less money” is no longer viable, particularly for entry and mid-tier segments, which could contract by 20% or more, posing challenges for brands that have historically dominated these categories.
Fanpage:Â TechArena.au
Watch more about AI – Artificial Intelligence
