Global smartphone sales fell 6% year over year in the second quarter of 2026, dropping to 272 million units, according to an Omdia report released this Thursday. The number reinforces a trend analysts had already flagged: the mobile market, already stagnant, now faces the real weight of the memory crisis. Rising DRAM and NAND prices, driven by the voracious demand from AI data centers, are making phone manufacturing more expensive — and the cost is being passed on to consumers at a time of weak demand.
The effect is double and perverse for the sector. On one hand, memory has become so expensive that manufacturers must choose between absorbing the cost and squeezing margins, or passing it on and losing sales. On the other, the shortage reduces the ability to produce devices in volume, especially entry-level models, which compete precisely on price. Some industry projections, such as IDC's, estimate that global 2026 shipments could see the biggest decline ever recorded — something in the double-digit annual range, driven exactly by the combination of expensive memory and weak consumption.
The irony is that the villain of this story is also the hero of another. The same memory shortage that makes phones more expensive is what drives record profits at semiconductor makers, such as Samsung, which this week reported its best quarter in history thanks to AI server chips. The money consumers are no longer spending on smartphones is being reallocated, on an industrial scale, to the data centers that power generative models. The tech sector is, in a sense, robbing one pocket to fill another.
For the consumer, the practical effect is already taking shape on the shelves. Mid-range and entry-level models suffer the most, because memory represents a proportionally larger share of a cheap device's total cost. Some manufacturers already indicate that budget phones should migrate from LCD screens to cheaper technologies to compensate for the squeeze — a sign of how the crisis is pushing engineering decisions. The trend also favors a preference for used devices or delaying upgrades, which further compresses the sales cycle.
The question that remains is when this cycle turns. AI's demand for memory shows no sign of cooling, and DRAM and NAND production capacity takes years to expand. Meanwhile, the smartphone market — once the consumer engine of the tech industry — watches a structural migration of value toward AI infrastructure. Perhaps the lesson is that, for the first time, the phone has ceased to be the industry's center of gravity. And nobody yet knows for sure what will replace it in that role.
There is also a geographic layer to this story worth watching. Emerging markets, where price sensitivity is higher, tend to feel the drop more acutely, while mature regions manage to sustain volume with the support of trade-in programs and financing plans. But even those mechanisms have limits when memory costs squeeze the viability of producing cheap devices. Analysts point out that, without a reversal in DRAM and NAND prices, the sector may see consolidation: smaller manufacturers, without the scale to absorb the cost, may exit the market or retreat to niches. What seemed like a quarterly fluctuation may, in fact, be reordering the competitive structure of the entire mobile industry.
Sources: Engadget, IDC, Reuters, Counterpoint Research
✓ Independent sources cross-checked and verified before publishing
