Your Next Phone Just Got More Expensive, Thanks to AI

That phone upgrade you've been planning? You might want to think twice. The global smartphone market is heading for its worst year on record, with shipments expected to plummet 13% in 2026 — the lowest annual volumes since 2013.

When AI Eats Your Phone Budget

The culprit isn't what you'd expect. It's not supply chain disruptions or trade wars. It's AI.

More specifically, it's tech giants like Amazon and Meta going on a spending spree for AI infrastructure, hoarding memory chips that smartphones desperately need. The result? Smartphone manufacturers are being told to "stand in line" behind the hyperscalers.

"A lot of these memory companies are asking smartphone vendors to stand in line behind the hyperscalers, which means allocation to smartphone vendors is deprioritized," explains Tarun Pathak, research director at Counterpoint Research.

RAM prices have already surged as data centers and phones compete for the same critical components. What started as an AI gold rush has become a zero-sum game where your next phone is the casualty.

Even Apple and Samsung Feel the Squeeze

The big players aren't immune. While companies like Apple and Samsung have "stronger supply chain integration and higher pricing power," according to Counterpoint, they're still caught in the same crunch.

The real pain hits smaller manufacturers and budget devices hardest. Memory costs represent a much larger chunk of low-end phone prices, making it "difficult for vendors to stay profitable while keeping prices down," notes Bryan Ma, VP of devices research at IDC.

Some manufacturers might exit the budget market entirely — a structural shift that could reshape the entire industry.

The Consumer Squeeze Play

Manufacturers facing shrinking margins have one obvious move: pass the pain to consumers. The ripple effects are already visible:

• Fewer new users: High prices push first-time buyers to delay purchases
• Longer replacement cycles: People hang onto their current phones longer
• Booming secondary market: Used phones become the new budget option

Interestingly, even in the used market, Apple and Samsung devices command premium prices due to their "aspirational pull," as Pathak puts it.

The Long Wait for Relief

Don't expect quick relief. Experts see the earliest recovery point in late 2027, assuming "additional memory capacity comes online." That's assuming everything goes right.

IDC is watching for potential relief from Chinese memory suppliers entering the market or expanded production capacity. But in the near term? "We see little reassurance," Ma admits.

The smartphone market has always been cyclical, but this downturn feels different — driven not by consumer demand but by competing industries fighting over the same scarce resources.