An increase in demand for computers and power data centers AI causes a huge shortage of RAMdriving memory prices very high. Today, analyst firm IDC predicts that this will cause smartphone shipments to drop 12.9% this year, making it the biggest one-year drop in more than a decade. Hours after IDC published its report, another analyst firm, Counterpoint, made a similar prediction and said that the market will decline by 12% this year.

Last year, IDC reported that manufacturers are shipping 1.26 billion devices by 2025. The company predicts that number will drop to 1.12 billion this year.

“The memory crisis will cause more than a temporary decline; it marks a structural reset of the entire market, fundamentally shaping the long-term TAM (total addressable market), the vendor landscape, and the product mix,” said Nabila Popal, senior research director of IDC’s Worldwide Quarterly Mobile Phone Tracker, in a statement.

Popal said that due to the lack of memory, the average retail price of a smartphone is expected to increase by 14%.

“We expect consolidation as smaller players exit, and low-end vendors face sharp declines in shipments amid supply constraints and reduced demand at higher price points. Although shipments will witness a record drop, smartphone ASP (average selling price) is expected to rise 14% to a record $523 this year,” he added.

Popal also noted that rising component costs could make the sub-$100 smartphone “permanently uneconomical,” pricing out phone manufacturers that make devices at that price point.

The company says that, due to this trend, shipments to the Middle East and Africa will fall more than 20% year-on-year. China and the wider Asia Pacific region (excluding Japan) will also see declines of 10.5% and 13.1%, respectively.

IDC added that it expects RAM prices to stabilize by mid-2027.

Counterpoint says premium smartphones will be stronger with this change, but the sub-$200 smartphone segment will see a 20% decline.

“The impact is expected to continue until H2 2027, as it will take several quarters to realize the expansion of memory supply. Low-end smartphones are likely to be the most affected, especially as LPDDR4 supply is faster than expected. OEMs are already responding with launch delays, streamlined portfolios, and specification trade-offs. We also observed a 20% increase in OEM prices in portfolios of January by 10% in January 2026,” said Principal Analyst Yang Wang.

The company also predicts that price fluctuations among handsets will also boost the second-hand device market.

Earlier this year, Nothing co-founder and CEO Carl Pei also warned that smartphones will cost more in 2026 as memory costs for smartphones increase. “Brands now face a simple choice: raise prices by 30% or more in some cases, or downgrade specs. The ‘more specs for less money’ model built by many value brands will no longer be sustainable in 2026,” he said.

“As a result, some markets, especially the entry and mid-range segments, are likely to decline by 20% or more, and brands that have historically dominated these segments will struggle,” Pei added.