An increase in the demand for computers and data centers to support AI is leading to a significant RAM shortage, which in turn is pushing memory prices upward. Currently, the analyst firm IDC forecasts that this situation will lead to a 12.9% decline in smartphone shipments this year, representing the largest single-year drop in over ten years. Shortly after IDC released its findings, Counterpoint, another analytics firm, echoed this prediction, suggesting a 12% drop in the market this year.

Earlier in the year, IDC indicated that manufacturers delivered 1.26 billion devices in 2025. The firm now anticipates that this number will fall to just 1.12 billion in the current year.

“The memory shortage is set to initiate more than a temporary downturn; it signifies a structural transformation of the entire market, significantly altering the long-term TAM [total addressable market], the vendor landscape, and the product mix,” stated Nabila Popal, senior research director at IDC’s Worldwide Quarterly Mobile Phone Tracker, in a statement.

Popal noted that due to the memory shortage, the average selling price of a smartphone is predicted to increase by 14%.

“We foresee consolidation as smaller players withdraw, and low-end manufacturers will experience significant declines in shipments due to supply limitations and diminished demand at elevated price levels. Despite the anticipated record drop in shipments, smartphone ASP [average selling price] is expected to increase 14% to an unprecedented $523 this year,” she further elaborated.

Popal also remarked that escalating component costs may render the sub-$100 smartphone “permanently unfeasible,” eliminating options for manufacturers that create devices at that price point.

The firm indicated that, as a consequence of this trend, shipments in the Middle East and Africa will decrease by over 20% year-over-year. Additionally, China and the wider Asia Pacific region (excluding Japan) will experience declines of 10.5% and 13.1%, respectively.

IDC projected that RAM prices will likely stabilize by mid-2027.

Counterpoint indicated that high-end smartphones would remain more resilient amid this shift, but the sub-$200 smartphone sector will see a 20% decline.

“The effects are expected to persist through the second half of 2027, as it will take several quarters for memory supply growth to come to fruition. Lower-end smartphones are anticipated to be the most affected, particularly due to the rapid decline in LPDDR4 supply. OEMs are already adapting with postponed launches, streamlined product lines, and adjusted specifications. We have also noted price increases of 10% to 20% across some Android OEM product lines in January 2026,” stated Principal Analyst Yang Wang.

The firm also anticipated that price fluctuations within handsets will enhance the second-hand device market.

Earlier this year, Carl Pei, co-founder and CEO of Nothing, warned that smartphone prices would rise in 2026 due to increasing memory costs. “Companies are now left with a straightforward choice: increase prices by 30% or more in some cases, or downgrade specifications. The ‘more features for less cost’ approach that many value brands once thrived on is no longer viable in 2026,” he stated.

“Consequently, certain markets, especially in the entry and mid-tier segments, are likely to contract by 20% or more, and brands that have traditionally led these markets will face challenges,” Pei continued.