The smartphone market may be facing a record decline in shipments! Under the super cycle of storage, the waiting for consumer electronics is "the darkest moment"

Renowned research institution Counterpoint Research in the field of technology said on Monday that the global smartphone market is heading towards the steepest annual decline in shipment data ever recorded, with an expected significant decrease of 13.9% to 1.08 billion units in shipments this year. The core logic behind this trend is the continuing deterioration of shortages of DRAM/NAND storage chips and the continuous increase in prices of core components such as storage components. According to Counterpoint's latest forecast, the decline is further down from the already pessimistic expectation of a 12.4% decline in February, and emphasizes that global chip supply tension has been further intensified by the Iran war. Driven by the AI infrastructure frenzy, the global stock market's consumer electronics sector can be considered the biggest loser. Current industry data collectively indicate that while AI infrastructure construction is triggering the so-called "storage super cycle" - with storage chip (DRAM/NAND/HBM) prices and demand surging to historical levels, some contract prices have reached astonishing levels year-over-year and quarter-over-quarter - the dividend of this cycle is strongly tilted towards upstream areas such as storage chips in the chip industry chain, resulting in a huge headwind for the downstream traditional consumer electronics market. Industry price monitoring data compiled by another research institution, TrendForce, shows that in the second quarter of 2026, global mobile DRAM memory chip contract prices increased by approximately 7883% compared to the previous quarter. Prices of memory such as LPDDR5X may increase by more than double year-on-year, causing memory costs to increase from 1015% of smartphone material costs to about 3040%. This undoubtedly directly increases the overall cost of devices and squeezes the profit margins of mid-range and low-end devices. The impact on the low-end consumer electronics market is most severe. As chip manufacturers accelerate the diversion of chip production capacity to high-performance AI-related chips with much more complex manufacturing and testing processes, the production economics of entry-level PC and smartphone consumer electronics devices have decreased, with low-end smartphones being the hardest hit. Data compiled by institutions show that wholesale prices of smartphones unexpectedly rose by 14% in the first quarter of 2026, while shipments decreased by 3.1% year-on-year. As the accumulated stock is depleted before the impact of supply shocks, this trend is expected to continue, with some models priced below $150 possibly disappearing from the consumer electronics market due to the high cost of storage components and dwindling demand. A senior analyst from Counterpoint, the independent research company mentioned above, stated, "Manufacturers of low-end affordable smartphones are caught between an inability to absorb rising costs and a limited consumer base." Counterpoint is known globally for its quarterly smartphone shipment data. "The issue is no longer how to achieve shipment volume or accelerate market share growth, but whether to continue to stay in this market." The analyst pointed out that the shortage of storage chips is the most serious supply-side challenge facing the smartphone industry, along with the wave of chip price increases, and added that these manufacturers cannot continue to offset the impact through pricing increases or product adjustments. On the other hand, the high-end flagship smartphone models have shown more resilience due to their core consumer base having relatively low price sensitivity and higher demands for AI features and larger storage capacity, driving up average prices. However, shipments of mid-range and low-end models have significantly declined, highlighting the need for cheap smartphone manufacturers to drastically reduce storage specifications or increase selling prices to cushion the double erosion of sales and profits caused by the rising costs of memory. The high-end smartphone market segment has proven to be more resilient. For example, the world's largest consumer electronics giant, Apple Inc., achieved record revenue in the first three months of this year, thanks to consumers upgrading to its newly launched iPhone 17 series flagship smartphones. Counterpoint's forecast data shows that Apple Inc.'s overall shipments in 2026 are expected to remain flat, with a slight increase of 5% anticipated next year. Due to the more stable chip supply compared to many competitors (covering more cost-effective long-term contracts) and stronger profit margins for iPhone products, Apple Inc. is in the most advantageous position in the consumer electronics industry, poised for market share expansion and facing minimal price pressure. Another focus on high-end smartphones, Samsung Electronics, maintained stable sales in the first quarter, with Counterpoint forecasting only a 4% decrease in full-year shipments. Benefiting from a stable chip supply system and consistent product line growth momentum, Samsung's shipment and profit margin performance is expected to outperform the overall consumer electronics market. While the storage super cycle is driving a surge in demand for AI chips, optical interconnects, and data center CPUs among other upstream AI computing chain components, this phenomenon does not represent a growth opportunity for consumer electronics downstream; rather, it presents a differentiation between "upstream dividends" and "downstream pain points." For the consumer electronics industry, the storage super cycle comes with a serious imbalance in supply and demand, price pressures, and declining demand that create a challenging economic environment, instead of the traditional cyclical improvement of both quantity and price. The entire consumer electronics industry is undergoing a redirection of storage resources and structural mismatch, which significantly suppresses sales and profits of products such as smartphones.