Revealed in Counterpoint’s latest report, this is the first decline after a strong run in 2025, coming down mainly to higher device prices, supply pressure in entry-level phones, and instability in parts of the Middle East.

The toughest hit came from the lowest price segment where phones priced between $50 and $99 fell 41% compared to last year.

Many of these devices were harder to find in stores, especially in parts of Africa and the Middle East where supply chains have been strained.

Prices rose across the board due to a global memory shortage affecting DRAM and NAND chips. That pushed up costs of production and fed directly into retail prices.

At the same time, conflict in parts of the Middle East raised shipping costs and disrupted normal distribution routes. Both factors combined to weaken demand in price-sensitive markets.

Samsung was the largest player in the region and grew 19% year on year. The company held steady because it had stronger inventory levels and a wider mix of premium devices. Its newer high-end models also supported sales, helping it avoid the worst of the supply pressure affecting other brands.

Apple also recorded strong growth, with iPhone shipments up 33% year on year. Its share in the region rose to 8%, up from 6% a year earlier. Demand was sustained in premium markets, particularly in the Gulf states where higher-income consumers continued to upgrade.

HONOR posted the most striking increase, growing 154% year on year. The jump reveals a low base last year, but also stronger positioning in the premium mid-range segment, especially in GCC markets where demand for higher-spec devices has been stable.

In contrast, Transsion and Xiaomi faced tougher conditions. Both brands had limited product availability in parts of the Middle East. In some retail channels, stock shortages were visible, which directly affected sales volumes.

Despite the overall decline, the MEA region showed stronger movement towards higher-end devices, with 5G smartphone shipments rising 42% year on year, and AI-capable smartphones also increased by 64%. Although most of that growth stayed concentrated in devices priced above $400.

This has not offset the weakness in the entry-level segment. Demand in lower-income markets has reduced as fuel prices, logistics costs, and job cuts in parts of the Gulf affect spending power. Buyers are becoming more cautious, and upgrades are happening less frequently.

The outlook for the next quarter is weak. Analysts expect further pressure on shipments in Q2 2026, with fewer promotional periods and challenges in both supply chains and regional conditions.

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This projection, contained in Omdia’s latest outlook, and based on Q1 memory price assumptions, which indicate that pricing pressure and constrained supply will begin to ease in the second half of the year.

The global smartphone market will face significant challenges in 2026 as tightening memory supply and elevated pricing place increasing cost pressures for vendors.

Memory now accounts for a significantly larger share of the smartphone bill of materials (BOM), eroding vendor profitability, particularly in entry-level devices.

Since 4Q25, smartphone manufacturers have already begun raising retail prices in order to maintain profit margins.

However, sustained price increases are likely to weaken demand, particularly in price-sensitive emerging markets.

Further memory pressure and geopolitical volatility raise the risk of over 15% smartphone shipment decline in 2026

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 server demand locking in production capacity, smartphone vendors will face further cost escalation across both entry-level and premium devices.

At the same time, escalating geopolitical tensions in the Middle East could amplify macroeconomic volatility including higher energy prices, freight costs, and foreign-exchange instability, further weakening consumer upgrades in price-sensitive markets.

Under this downside scenario, global smartphone shipments are expected to decline by more than 15% in 2026, potentially exceeding the 12% contraction recorded in 2022.

“Rising memory costs and macro headwinds are expected to impact smartphone demand unevenly across price segments,” said Zaker Li, Principal Analyst at Omdia. “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.

These segments are largely served by entry-focused vendors that rely heavily on LPDDR4X memory, operate with thin margins, and often have lower priority in the memory supply chain, leaving them more exposed to cost inflation and potential supply shortages. As a result, vendors concentrated in these price tiers are expected to face production constraints and shipment reductions, with many projected to experience double-digit declines in 2026.”

“In contrast, the premium segment is expected to remain relatively resilient despite rising component costs. Devices priced above $800 are forecast to grow by around 4% in 2026, supported by stronger brand positioning and greater pricing flexibility.

Apple maintains a dominant presence in the high-end market and benefits from strong supply chain relationships and higher margins that help absorb component cost inflation. Samsung also benefits from vertical integration and internal semiconductor capabilities, which provide greater security of supply and priority access to key components. While Samsung still utilizes LPDDR4X in some models and faces similar cost pressures, its supply chain advantages reduce the risk of significant shortages.”

“The evolving cost environment is reshaping dynamics across the global smartphone supply chain,” added  Li. “As entry-level smartphone demand weakens, suppliers of mid- and low-end components – including chipsets, camera modules, and other key parts – are likely to face declining orders and intensified pricing pressure. Vendors are already responding by simplifying product configurations and tightening BOM costs. At the same time, volatility in memory pricing is pushing brands toward shorter-term production planning and smaller order volumes, increasing operational pressure across the supply chain. Smaller ODMs and specialized component suppliers will also face growing consolidation risks as margins compress and demand becomes more concentrated among leading brands.

In this environment, vendors will need to prioritize higher-value product innovation and disciplined production planning, while channel partners strengthen inventory management and demand forecasting to navigate slower replacement cycles and shifting consumer demand.”

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