Correction: Honor’s expected shipment decrease in the final paragraph is 16%, not 20%.
Counterpoint Research on Monday updated its outlook for the global smartphone market, predicting a 13.9% fall in shipments this year to 1.08 billion units - the steepest annual contraction on record. That downgrade deepens an earlier forecast made in February, when the firm anticipated a 12.4% decline. Counterpoint attributes the revision primarily to a worsening shortage of memory chips, a squeeze that it says has been exacerbated by the Iran war.
The supply disruption has not been uniform across the market. Manufacturers of entry-level devices have been hit hardest as chipmakers redeploy capacity toward higher-margin, AI-related chips. With production for low-cost components becoming less economical, the lower end of the market is experiencing acute shortages.
Counterpoint’s data show global smartphone wholesale prices rose 14% in the first quarter even as shipments dropped 3.1% year on year. That pricing trend is expected to persist until inventories carried over from before the supply shock are exhausted. The firm cautions that some smartphone models priced below $150 are likely to disappear from the market as production becomes uneconomic.
"Smartphone makers in the low and mid-tier are caught between cost increases they cannot absorb and consumers with limited spending power," said Wang Yang, a principal analyst at Counterpoint. "The question is no longer how to grow shipments or market share, but whether to remain in the market at all." Wang added that the memory chip shortage represents the most severe supply-side disruption the industry has seen and that manufacturers have limited ability to compensate through price or product changes.
The premium segment has shown more resilience. Apple reported record revenue for the first three months of the year, supported by customer upgrades to its iPhone 17 series. Counterpoint projects Apple’s 2026 shipments will remain flat before rising 5% the following year. With comparatively more stable chip supply and healthier margins than many rivals, Apple is positioned to take market share and may face less immediate pressure to raise prices.
Samsung Electronics kept volumes steady in the first quarter. Counterpoint expects Samsung to record only a 4% decline in shipments over the full year, allowing the company to outperform the broader market thanks to steadier supply and a consistent product line-up.
By contrast, companies concentrated in the budget segment are forecast to see steeper declines. Transsion, which has high exposure to models priced below $150, is projected to suffer a 32% fall in shipments this year. Xiaomi is forecast to post a 28% decline. Honor is expected to see shipments drop 16%.
Industry participants and market watchers will be watching inventory levels, chip supply allocations and pricing closely in the coming quarters to gauge when and how the market might stabilize. For now, the imbalance between elevated component prices and falling shipment volumes underscores the uneven impact of the chip shortage across price tiers.