AI frenzy squeezes the supply chain, and smartphones may face a situation of declining volume and rising prices in 2026

As upstream semiconductor manufacturers prioritize capacity for high-end components needed for AI data center construction, the critical shortage of storage chips faced by consumer devices is driving up production costs, thereby suppressing shipment growth.

On December 16, according to the latest report from industry tracking agency Counterpoint Research, global smartphone shipments are expected to decline by 2.1% in 2026. This forecast not only reverses the estimated 3.3% growth trend for this year but also significantly lowers the previously expected slight growth of 0.45%. Meanwhile, driven by a surge in total component costs of 10% to 25%, the global average selling price (ASP) of mobile phones is expected to rise by 6.9% in 2026.

Analysis indicates that the core reason for this market turbulence lies in the bottlenecks of the semiconductor supply chain. To meet the expansion demands of AI data centers, chip manufacturers are prioritizing the production of high-end storage chips for NVIDIA accelerators, leading to a tight supply of dynamic random-access memory (DRAM) used in laptops, home appliances, and smartphones.

Market differentiation will further intensify, as manufacturers have varying capacities to withstand cost shocks due to different profit margin spaces. Counterpoint points out that Apple and Samsung have stronger risk resilience and can weather the challenges of the coming quarters.

Chip Shortage Drives Up Bill of Materials Costs

The ongoing expansion of global data centers has increased demand for NVIDIA systems, consuming the production capacity of major memory chip suppliers like SK Hynix and Samsung.

Although this demand is primarily concentrated in the server sector, the shortage of key component DRAM has also affected the smartphone industry. Due to demand exceeding supply, DRAM prices have surged significantly this year.

Data from Counterpoint shows that for low-end smartphones priced below $200, the bill of materials (BoM) cost has risen by 20% to 30% since the beginning of this year. The material costs for mid-range smartphones have also increased by 10% to 15%.

This upward trend in costs has not yet peaked. MS Hwang, research director at Counterpoint, noted in the report that storage chip prices may rise another 40% before the second quarter of 2026, which will further increase BoM costs by more than 8% to 15% on top of the current high levels.

These rising component costs may ultimately be passed on to consumers, directly driving up the average selling price of devices.

Manufacturer Response Strategies and Market Differentiation

In the face of cost pressures, consumer electronics manufacturers are adjusting their strategies.

In recent months, consumer electronics manufacturers, including Xiaomi, have warned of potential price increases, while companies like Lenovo have begun stockpiling storage chips to cope with rising costs.

Counterpoint states that some companies may encourage users to purchase high-end models with less impact on profits or take measures to reduce specifications, such as reusing old components, downgrading camera modules, displays, or even audio devices, and selling phones with smaller memory MS Hwang stated that Apple and Samsung are the most capable of facing challenges in the coming quarters, while those manufacturers with little room for maneuver between market share and profit margins will find the situation very difficult.

Counterpoint emphasized that the storage chip deficit could have a particularly severe impact on entry-level smartphones.

In addition to smartphone manufacturers, Nintendo's stock price also fell in December, as the market is concerned that supply chain issues may affect the profitability of its flagship product, the Switch 2 gaming console