Rising memory costs have negatively impacted global smartphone shipments, resulting in a seven per cent year-on-year drop as of the second quarter of 2026.

FDM CCS Insight, establishing this, said the downturn marked the second consecutive quarter where higher component costs have affected the smartphone market, with manufacturers facing pressure from memory shortages and rising semiconductor prices.

The analyst noted that smartphone makers have continued to secure component supplies and build inventories in anticipation of further cost increases expected later this year. As a result, average smartphone selling prices rose by 13 per cent compared with the previous quarter, driven both by higher production costs and a shift towards premium devices.

The insight forecasts that the primary smartphone market would contract by 12 per cent this year.

Analyst at FDM CCS Insight, Ben Hatton, said the market had performed better than expected during the first half of the year despite mounting challenges.

“The first half of the year proved more resilient than expected. However, we remain cautious about the second half, as further price increases and prolonged memory shortages, which we expect until 2028, will continue to raise device prices and soften consumer demand,” he said.

While most major manufacturers increased prices, Apple was reported to have maintained relatively stable pricing in the first half. However, the company is expected to face similar cost pressures in the coming months.

Regional performance varied. North America and Europe experienced relatively modest declines, supported by continued demand for premium smartphones. In contrast, emerging markets recorded sharper falls in sales as consumers faced more significant price increases and delayed purchases or turned to lower-cost alternatives.

Senior Analyst at FDM CCS Insight, Ekta Mittal, said narrowing price differences between Android and iPhone devices are beginning to influence purchasing decisions.

“A narrowing price gap between Android and iOS has created an opportunity for Apple to attract users who were previously priced out of its ecosystem,” she said.

“At the same time, limited availability of entry-level smartphones in the primary market is accelerating the trend toward more-premium models. Consumers are paying more for lower-specification devices than previous-generation models at similar prices. As affordability comes under pressure, financing, leasing and buyback programmes will be crucial for long-term adoption and to drive upgrades.”

The report also highlighted changes in the secondary smartphone market. The organised refurbished device sector, which includes services such as refurbishment, data wiping and warranty support, grew by three per cent compared with the same period last year.

Growth, however, was slower than previously anticipated as supply shortages affected the availability of used devices. In the United States, a reduction in trade-in activity limited the number of smartphones entering the refurbishment market, although strong exports from China and Japan helped offset some of the supply constraints.

Many emerging markets continued to see growth in demand for refurbished devices but import restrictions on used smartphones in some countries restricted availability and constrained market expansion.
The report expects the organised secondary smartphone market to grow by nine per cent in 2026, below earlier forecasts because of ongoing supply challenges.

Hatton said the longer-term outlook for refurbished smartphones remains positive as new devices become increasingly expensive.

“The opportunity for the secondary market remains immense. As new devices become progressively more expensive, a growing number of consumers will seek alternatives in the secondary market. Increased participation by major phone-makers is boosting consumer confidence and trust in this space. Improving trade-in programmes is critical for all competitors in the sector to meet growing demand.”

The findings underline the growing influence of memory supply constraints on the global smartphone industry, with higher component costs affecting both consumer purchasing behaviour and manufacturers’ product strategies. As shortages are expected to persist for several years, pricing pressures are likely to remain a significant challenge across the sector.