The global smartphone market is heading into an unprecedented downturn driven by soaring memory-chip costs and geopolitical supply disruptions. Research firms IDC and Omdia now expect the market to shrink by about 13% to 15% this year, the steepest annual drop in the industry’s history, pushing shipment volumes back to levels last seen more than a decade ago.
Apple’s outgoing CEO Tim Cook acknowledged in an interview with The Wall Street Journal on Wednesday that consumer price increases are now unavoidable. Cook, who is expected to step down in September after 15 years in the job, called the jump in memory costs a "once in a hundred years" surge. He said Apple had worked hard to absorb the higher costs, but that it had become economically impossible, meaning the iPhone 18 series, due to be unveiled this fall, will likely cost more. Early estimates say Pro models alone could rise by hundreds of dollars to protect Apple’s margins.
The main driver is the massive shift in production by major chipmakers such as Samsung, SK Hynix and Micron toward high bandwidth memory for AI servers and data centers. That has sharply reduced the supply of DRAM and NAND chips for consumer devices, pushing their prices up more than fourfold in a year. The situation worsened after security tensions in the Middle East disrupted the global supply chain for helium, a critical input in semiconductor manufacturing.
Apple and Samsung can still secure components in advance thanks to their bargaining power, but smaller and mid-sized Android makers are being hit hardest, especially Chinese brands like Oppo, Vivo and Honor. Those companies, which rely on thin margins in cheaper phones, are facing manufacturing cost increases of up to 30%. Analysts expect the broader Android market to shrink by about 20% this year, while the average global smartphone selling price climbs to a record $550.
Memory chips, once among the cheapest parts of a phone, have become the industry’s biggest bottleneck because modern on-device AI features require far larger amounts of RAM. Looking ahead, analysts say the crisis will reshape consumer electronics, forcing weak brands out of the market and pushing big companies to cut back on low-end models in favor of premium and foldable devices. Price stability is not expected to return before mid-2027, and even then smartphones are likely to remain permanently more expensive than before.
