Global smartphone sales plummeted to their lowest second-quarter level in 13 years, primarily driven by manufacturers passing on the escalating costs of memory components to consumers. According to a Monday (July 13) press release from Counterpoint Research, total shipments in the second quarter declined by 11% year over year, marking the lowest Q2 performance since 2013.
Memory Crisis Fuels Price Increases
The significant sales slump is directly linked to a persistent rise in memory prices. Memory suppliers have increasingly prioritized meeting the robust demand from artificial intelligence data centers over that from consumer electronics, leading to a constrained supply for smartphones. This shift has compelled manufacturers to adjust pricing upwards, directly impacting consumer affordability and demand.
Shilpi Jain, Senior Analyst at Counterpoint Research, underscored the severity of the situation, stating in the release, ‘The global memory crisis has now overtaken every other factor as the single biggest drag on the smartphone industry.’ Jain further elaborated on the evolution of the problem: ‘What started as a components issue last year is now a full-blown demand issue.’
Apple’s Resilience Amidst Market Downturn
In stark contrast to the broader market trend, Apple emerged as the sole major manufacturer to register growth during the quarter. The company saw its shipments increase by 3%, a performance attributed to its decision not to implement smartphone price hikes during the period. Apple also benefited from the sustained strength and consumer appeal of its iPhone 17 series, according to the research firm.
However, Apple has not been entirely immune to rising component costs. Reports in June indicated that the tech giant had raised prices for its Macs and iPads, citing surging component expenses, though it maintained iPhone pricing.
Broader Economic Headwinds and Market Segments
Beyond the memory crisis, several other macroeconomic factors exacerbated the decline in smartphone demand. Geopolitical tensions, particularly in the Middle East, contributed to further inflated smartphone prices. A broader macro squeeze, characterized by slower global growth, higher inflation, and record-low consumer sentiment, also played a significant role in dampening consumer spending on new devices.
The impact of these rising costs has been particularly acute in specific market segments. Jain noted that ‘The entry and mid-tier devices, which account for a majority of the world’s smartphone volumes and are the most exposed to BOM [Bill of Materials] economics, become structurally unfeasible at previous price points.’ This suggests a disproportionate effect on more budget-conscious consumers, who form the bulk of the global smartphone market.
Outlook: Persistent Shortages and Demand Recovery
Looking ahead, Counterpoint Research projects a continued challenging environment for the smartphone industry. The firm anticipates that global smartphone shipments will decline by approximately 14% for the full year. Furthermore, the global memory shortage is expected to persist well into 2027, with Counterpoint stating that ‘overall demand recovery is unlikely until memory supply conditions improve substantially.’
The expansion of generative AI continues to reshape the economics of consumer electronics, with memory components increasingly diverted towards large-scale AI systems under long-term supply agreements. This trend, first reported in January, was a key discussion point at MWC Barcelona 2026, where the shortage of memory chips and the integration of AI features into mobile devices topped the agenda. The ongoing prioritization of AI data centers for memory supply suggests that the smartphone industry will continue to grapple with elevated component costs and constrained supply for the foreseeable future, making a swift rebound in sales unlikely.
