The smartphone market has changed character this year. Units are dropping while prices are climbing sharply, with consumers expected to absorb the cost.
According to IDC’s Worldwide Quarterly Mobile Phone Tracker, worldwide smartphone shipments will fall 16.7% in 2026 to just over 1 billion units.
That is a sharp downgrade from the 13.9% decline we forecast only one quarter ago, and it is the steepest annual contraction the industry has ever recorded. What makes this moment unusual is that the market is shrinking and getting more valuable at the same time. Total market value will still grow 6.3% to $613 billion, because higher prices are now doing the heavy lifting that volume once did.
Why did the outlook get worse?
The memory shortage, which started in late 2025, is striking hard in the second half of 2026, with shipments forecast to drop by 27.2% YoY. NAND and DRAM costs continue to rise, up over 300% YoY, and vendors are running out of options to absorb the increased costs. As memory prices are expected to continue increasing until at least 2028, vendors are adapting their portfolios to a permanently higher cost structure. The 173 million smartphones below $100, which shipped last year, are facing an existential crisis. Android players focused on low-end devices, which were already operating on razor-thin margins, are cutting low-end models and pushing a higher-end product mix. In Q2 2026, this segment saw an almost 60% YoY drop and is expected to fall faster in the second half.
How much are smartphone prices expected to increase?
This is where the forecast has moved most. The average selling price of a smartphone will reach $581 in 2026, up 27.6% in a single year and revised upward from the $550 projected last quarter. More brands are passing the increased cost to the end consumer, with prices rising faster than expected. The premium end will remain more resilient to the price hikes as long-term interest-free financing options are more prevalent in developed markets like the US and UK. The mass market does not hold up, especially in emerging markets, which are expected to drop over 20% this year. This is why the unit decline continues to deepen while the value line keeps rising.
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The memory tsunami that we warned about is now hitting the market in full, and consumers are starting to pay the AI bill. The components that make AI possible are the same ones in short supply, and their cost is being passed straight through to the shelf. Average selling prices are up 27.6% this year and will keep rising well into 2027. The era of the cheap smartphone has ended. From here, the winners will be the vendors with the scale and supply leverage to hold demand at prices consumers have never had to pay before.
Who is winning the crisis, iOS or Android?
The crisis is not hitting everyone equally. Android bears almost the entire decline, falling 24.3% in 2026 as its most exposed vendors retreat from the entry tiers they can no longer serve profitably. Android share drops seven percentage points in a single year. iOS share moves in the opposite direction, increasing almost four percentage points from last year to a record-high 23.6% share, as shipments remain relatively resilient, down just 1.3% YoY in 2026. HarmonyOS sees strong growth off a small base, nearly tripling to 51 million units in 2026 as Huawei maintains a disciplined pricing strategy, taking full advantage of the crisis to gain share in China as the rest of the Android market contracts.
Is there any segment that is still growing?
Almost nothing in this forecast grows, except foldables. The category will grow 12.6% in 2026 to 22.9 million units, then accelerate to 18% growth in 2027, reaching roughly 27 million units. The rapid growth is thanks to Apple’s entry into the category in the second half of this year. Apple is not only adding a new model or increasing competition in the foldables category; it is converting a segment that was about to decline into the fastest-growing part of the industry.
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Apple’s entry into the foldable market has done more than reignite growth in a category that was losing momentum. It has fundamentally altered the market’s trajectory. Without Apple, foldable shipments would have declined at a double-digit rate year over year. We forecast Apple will ship more than 17 million foldable iPhones by 2027, capturing roughly 40% of the global foldables market. With an average selling price exceeding $2,550, Apple is expected to generate more than $45.7 billion in value and account for over half of the category’s total value. Perhaps most notably, Apple is positioned to challenge Huawei and Samsung for leadership in markets where they have long dominated, an extraordinary outcome for a product expected to be less than two years into its lifecycle.
What does this mean for consumers?
The days of the cheap smartphone are ending. The average handset now costs roughly $147 more than it did a couple of years ago, and the cheapest models are the ones leaving the shelves fastest. Buyers in price-sensitive markets will feel this loss the most, as the sub-$100 phones many of them relied on are being cut from vendor line-ups. For everyone else it means holding a device for longer and paying more at the point of upgrade. On-device AI is arriving, but the memory it runs on is scarce and expensive, and consumers are covering that cost directly.
What does this mean for vendors?
The next 18 months will separate the vendors who can operate in a structurally more expensive market from those who cannot. Apple, Samsung, and Huawei have the scale and pricing power to turn this challenge to their advantage. Smaller Android brands anchored in the entry tiers face the hardest stretch in the industry’s history, and some will not clear it. The market that emerges on the other side of the crisis, when the memory supply finally stabilizes in 2028, will be smaller in units, larger in value, and far more concentrated at the top. The cheap smartphone era is not pausing. It is over.