Pricing pressure and constrained supply will lead to a 7% decline in smartphone shipments in 2026, according to Omdia’s latest report.

The lower supply of chips is a particular concern because memory accounts for an increasing percentage of the overall cost of a smartphone. As a result, smartphone manufacturers began hiking retail prices in the fourth quarter of last year so that they could maintain profit margins, the report said. Yet sustained price increases are likely to weaken demand, particularly in price-sensitive emerging markets.

The research firm added that the forecast of a 7% drop in shipments could be optimistic: “Downside risks to the forecast remain significant. If memory prices continue rising into the second half of 2026 due to tight supply and increasing AI [artificial intelligence] server demand locking in production capacity, smartphone vendors will face further cost escalation across both entry-level and premium devices.”

“Rising memory costs and macro headwinds are expected to impact smartphone demand unevenly across price segments,” Zaker Li, Omdia principal analyst, said in a prepared statement about the smartphone shipment report.

“Devices priced below $100 are forecast to decline by nearly 31% year-on-year in 2026, reflecting the severe margin pressure vendors face in ultra-low-cost segments, which are highly sensitive to even modest shifts in the macroeconomic environment. Smartphones in the $100–$399 range, which represent the core volume bands of the global market, are also expected to contract as rising memory prices push retail prices upward in price-sensitive markets.”

The Omdia report noted that these segments are largely served by entry-focused smartphone vendors relying on LPDDR4X memory, and operating with smaller margins. These vendors often have a lower priority within the supply chain for memory, which means they are more exposed to inflation and supply chain issues.

The Omdia report predicted that vendors in these price tiers may face production issues that force reductions in shipments.