Your next smartphone will cost more and offer less, here’s the reason why

Smartphone buyers should prepare for significantly higher prices in 2026, as surging demand for AI data centers creates a global memory chip shortage that's driving up manufacturing costs across the industry.

Average smartphone prices are expected to rise 6.9% year-over-year in 2026, nearly double previous forecasts, according to Counterpoint Research. The firm also predicts global smartphone shipments will fall 2.1% next year, marking a sharp reversal from 2025's estimated 3.3% growth.

Memory crunch hits budget phones hardest

The crisis stems from skyrocketing demand for DRAM chips—critical components used in both AI data centers and smartphones. Companies building AI infrastructure have created supply bottlenecks, pushing memory prices up an estimated 40% through mid-2026.

Manufacturing costs have already surged dramatically this year. Budget phones under $200 have seen their bill of materials increase 20-30%, while mid-range and premium devices face 10-15% cost hikes, Counterpoint reports. An additional 8-15% increase is expected in the first half of 2026.

"In the lower price bands, steep price increases on smartphones are not sustainable," said Counterpoint Senior Analyst Yang Wang. "If cost pass-through isn't possible, OEMs will start pruning parts of their portfolios—that's actually what we are starting to see with significantly reduced volumes of low-end SKUs."

Apple and Samsung best positioned to weather storm

The research firm indicates Apple and Samsung are best equipped to handle the shortage, with predicted shipment declines around 2%. Chinese manufacturers like Honor, Oppo, and Vivo face steeper challenges, with Honor potentially seeing declines exceeding 3%.

To manage rising costs, some manufacturers are already downgrading specifications on camera modules, displays, and audio components, or reusing older parts. Others are pushing consumers toward higher-priced "Pro" models to maintain profit margins.

For consumers planning upgrades, the message is clear: 2026 phones will likely cost more while offering fewer meaningful improvements, particularly in the budget and mid-range segments where the memory shortage hits hardest.