Smartphone shipments to fall 15% as AI demand lifts memory prices

CCS Insight expects global smartphone shipments to fall 15% in 2026 as AI server demand pushes up memory prices and handset makers pass those costs to buyers.

The research firm said new phone shipments fell 4.4% in the first quarter, even as retailers and distributors built inventory ahead of price increases. CCS said some entry-level phones now cost more than 50% more than comparable models did in 2025.

AI infrastructure spending sits at the center of the squeeze. Cloud providers need high-performance memory for GPU servers, and chipmakers can earn more from those parts than from the DRAM and NAND that phone and PC makers buy. That choice leaves handset makers competing for tighter supply.

Ben Hatton, a research analyst at CCS Insight, said memory now accounts for more than 30% of the bill of materials in some smartphones. Budget phones take the hardest hit because memory and storage represent a larger share of their total cost.

Buyers will respond by keeping phones longer or buying used devices. CCS expects the organized used-phone market to grow 15% this year after it grew 4% in the first quarter.

That shift helps consumers who need lower prices, but it also exposes a supply problem. Used-phone sellers depend on owners who trade in newer models. If buyers delay upgrades, refurbishers get fewer recent devices to resell.

Manufacturers face a narrow set of choices. They can raise prices, cut memory and storage, absorb margin pressure, or delay some models. Each option gives buyers less value.

The pressure also changes the software side of the market. Longer replacement cycles make operating system updates, security patches, batteries, and repair access more important. A buyer who keeps a phone for four years needs the vendor to support that device for four years.

Regulators have started to push in that direction through repair rules, battery requirements, and software-support expectations in some markets. Consumer protection agencies should treat longer phone lifespans as a market fact, since high component prices now make frequent upgrades less affordable.

The memory crunch gives large AI buyers an advantage because they can pay more for scarce parts. Phone buyers carry the cost at the checkout counter.