Global smartphone shipments are expected to decline by 2.1% in 2026, as rising semiconductor costs begin to dampen consumer demand, according to a report released Tuesday by technology research firm Counterpoint.

Electronics supply chains have recently been grappling with shortages of so-called legacy memory chips. Chipmakers have increasingly redirected capacity toward advanced memory used in artificial intelligence applications, tightening supply for other electronics such as smartphones.

“What we are seeing now is the low end of the market (below $200) being impacted most severely, with bill-of-materials costs increasing by 20% to 30% since the beginning of the year,” said MS Hwang, Research Director at Counterpoint.

The report said Chinese smartphone manufacturers including Honor Device and Oppo are particularly exposed, especially in the entry-level segment where margins are already under pressure.

“Apple (NASDAQ:AAPL) and Samsung are best-positioned to weather the next few quarters,” noted Yang Wang, senior analyst at Counterpoint.

Counterpoint also highlighted a separate development reported last month, noting that Nvidia’s (NASDAQ: NVDA) move to deploy smartphone-style memory chips in its AI servers could drive server memory prices to nearly double by late 2026. The firm said AI servers require significantly more memory than smartphones, creating a sharp increase in demand that current industry capacity may struggle to meet.

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