The smartphone market is facing a rare squeeze: DRAM and NAND shortages driven by AI data-center demand are pushing device makers to raise prices, and IDC now predicts shipments will fall sharply as a result. For buyers in emerging markets and manufacturers that live off thin margins, this will feel like a tectonic shift – not a short-lived bump.
IDC projects 1.1 billion smartphones will ship in 2026, a decline of 160 million units (12.9%) from 2025. The same forecast also expects the average selling price to jump 14% to $523 this year. Those two numbers – fewer phones, higher prices – tell the same story: component constraints, not weak demand, will reshape the market.
What’s actually happening
Big buyers of memory – hyperscalers and AI specialists building massive training and inference farms – are gobbling up DRAM and NAND. The result is a classic commodity squeeze: supplier capacity that had been allocated to smartphones and other consumer products is now booked into servers and accelerators. IDC’s research director Nabila Popal put it bluntly: ”The days of cheap smartphones are gone,” predicting memory prices won’t return to 2025 levels even after the crunch eases.
That matters because memory is no longer a marginal line item. Higher-resolution cameras, more app-hungry OSes, and larger storage tiers have pushed memory into a device’s cost center long ago. When DRAM and NAND cost more, the cheapest models – where margins are wafer-thin – get squeezed out first.
Who wins, who loses
Winners: Apple and Samsung. They have scale, inventory discipline, and pricing power to shift more sales toward premium SKUs and lock in memory supplies ahead of rivals. That gives them room to preserve margins and even expand share.
Losers: low-end OEMs and consumers in price-sensitive regions. IDC estimates the sub-$100 segment shipped 170 million units in 2025; with memory costs rising, that category may simply stop making economic sense for many manufacturers. Expect smaller brands to cut volumes, delay launches, or exit some markets entirely.
How companies can respond
Manufacturers have a few blunt instruments: raise prices, reduce base storage on entry models, or absorb costs and take a hit to margin – none are attractive. Some will pivot toward higher-margin models, bundle services and financing, or push trade-in and subscription programs to keep devices attainable for customers while protecting per-unit revenue.
On the technical side, OEMs can optimize software to use less memory, revert to cheaper storage formats where acceptable, or redesign product lines to favor components that are more available. But those moves take time and rarely erase the immediate impact of a memory shortage.
A brief history lesson
Memory markets are cyclical: prices spike when supply is tight and fall when fabs expand capacity. Past cycles have produced painful quarters for device makers and fleeting profit windfalls for memory suppliers. This time the demand surge is different in scale and permanence because it’s driven by AI infrastructure – a high-margin, long-term buyer that can outbid consumer electronics for scarce wafers and dies.
Exactly because server demand is structural, the memory industry’s next capacity plans – new fabs and process nodes – will chase higher-margin customers first. That makes a full return to cheap, plentiful mobile memory slower than usual.
What this means for consumers and the market
Expect three things in the near term: device prices rise, entry-level models disappear or become feature-poor, and the refurbished/used market grows as buyers hold phones longer. Carriers and retailers will lean harder on subsidies, financing, and trade-ins to hide higher upfront costs.
IDC’s timeline is cautiously optimistic: memory prices should stabilize by mid-2027, with shipments beginning a slow recovery (2% in 2027 and stronger growth in 2028). But even if supply normalizes, the market structure may not. Higher baseline ASPs could be the new normal, cementing advantage for market leaders and accelerating consolidation among smaller brands.
Verdict
This isn’t a temporary blip you can wait out by holding off on a purchase for a month. It’s a supply-driven, structural shift meaningfully shaped by the AI boom. For consumers, that will feel like the end of disposable, ultra-cheap phones; for the industry, it’s a reordering that favors scale, balance-sheet strength and the ability to buy ahead.