The surging demand for computers and data centers to power artificial intelligence is creating a massive shortage of RAM. This shortage is driving memory prices sharply higher. Now, analyst firm IDC predicts this will cause smartphone shipments to plummet by 12.9% this year, marking the biggest single-year dip in over a decade.
Earlier this year, IDC reported manufacturers shipped 1.26 billion devices in 2025. The firm now predicts that figure will drop to just 1.12 billion this year. According to Nabila Popal, senior research director with IDC’s Worldwide Quarterly Mobile Phone Tracker, this is more than a temporary decline. She states it marks a structural reset of the entire market, fundamentally reshaping the long-term total addressable market, the vendor landscape, and the product mix.
Popal said that due to the memory shortage, the average retail price of a smartphone is expected to rise by 14%. She explained that the industry should expect consolidation as smaller players exit and low-end vendors face sharp shipment declines amid supply constraints and lower demand at higher price points. Although shipments will see a record drop, the smartphone average selling price is projected to rise 14% to a record $523 this year.
Popal also noted that rising component costs could make the sub-$100 smartphone permanently uneconomical, effectively pricing out manufacturers that specialize in devices at that price point. IDC said that due to this trend, shipments in the Middle East and Africa will drop more than 20% year-over-year. China and the broader Asia Pacific region, excluding Japan, will also see significant declines of 10.5% and 13.1%, respectively.
IDC added that it expects RAM prices to stabilize by mid-2027. Last year, another analyst firm, Counterpoint, also forecast a decline in smartphone shipments, but it projected a smaller dip of just 2.6%.
Earlier this year, Nothing co-founder and CEO Carl Pei also warned that smartphones will cost more in 2026 as memory costs rise. He stated that brands now face a simple choice: raise prices by 30% or more in some cases, or downgrade specs. According to Pei, the model of offering more specs for less money that many value brands were built on is no longer sustainable in 2026. He added that as a result, some markets, particularly entry and mid-tier segments, are likely to shrink by 20% or more, and brands that have historically dominated these segments will struggle.