Smartphones, price boom: AI and memory chip crisis weigh on

Soaring memory chip costs and supply shortages have put pressure on manufacturers and pushed prices higher. The price increases for memory components are tied to artificial intelligence infrastructure projects that have increased production costs and pushed manufacturers to raise retail prices, cut shipments and prioritize profitability over volumes.

For further information: The Counterpoint report

The growing demand for memory from data centers for AI is reducing supplies for consumer electronics, causing production costs and final prices to skyrocket. The race for resources means higher component costs, with smartphone manufacturers forced to pass on part of the price increases to consumers.

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Counterpoint senior analyst Shilpi Jain explained that "Q3 2026 was the second consecutive quarter to take the full brunt of the memory crisis. The extreme memory shortage is pushing the smartphone market into a more selective phase, even reshaping consumer behavior. They are now keeping their devices longer than expected, increasingly considering refurbished models and prioritizing higher-value devices."

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Paradoxically, this crisis is impacting the market of cheap smartphones. Manufacturers may have more margin to absorb or pass on a price increase to a high-end smartphone, while the additional expense may weigh more on a budget device. So many manufacturing companies are reviewing their ranges by eliminating entry level models or increasing their prices. A strategy that disadvantages those with a limited budget and risk no longer being able to afford even low-end phones.

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Samsung maintained its top position with a 23% market share, helped by demand for the Galaxy Z Fold8 series and stable component supplies for its mid-range devices. Shipments fell 3% from a year earlier during the quarter. Apple's market share reached 22%, exceeding 20% ​​for the first time in a third quarter, despite a year-over-year decline in shipments. The absence of a base iPhone 18 model led to a smaller launch month channel fill than the full iPhone 17 lineup a year earlier, Counterpoint said. OPPO and vivo see shipment drops of more than 20%, with their market share declining to 9% and 8% respectively. Xiaomi saw a decline of more than 30%, reducing its market share to 12% as the company reduced exposure to lower-priced devices and some overseas markets to protect margins.

The outlook for the remainder of 2026 remains challenging. Production cuts, tighter wallets and a greater focus on premium devices are likely to continue, while price-sensitive segments face further pressure from higher device prices and limited component availability. A significant recovery in overall volumes is unlikely until component costs and supply conditions improve, Counterpoint analysts conclude.

For further information: Smartphone prices on the rise, more expensive chips and memories to support AI