What the Smartphone Market Decline Means for Everyday Buyers
The smartphone market decline driven by a memory crisis describes a global downturn in new handset sales caused by rising prices for DRAM and NAND components, which are pushing manufacturers to raise device prices, reduce affordable options, and unintentionally steer consumers toward longer upgrade cycles, the used smartphone market, and fewer budget phone choices. New data from research firms shows smartphone unit sales falling worldwide as the cost of memory chips surges due to artificial intelligence infrastructure demand. Counterpoint Research and UBS report global smartphone sell-through down 6 percent year-on-year in early 2026, with every major region in negative territory. CCS Insight expects shipments to fall 15 percent for the full year as some entry-level devices have already seen price hikes of more than 50 percent. With the average selling price of phones jumping, buyers are delaying upgrades and hunting for better value.
How the Memory Crisis Is Driving Rising Phone Prices
At the center of the smartphone market decline is a memory crunch that has turned basic components into premium parts. Hyperscalers are pouring an estimated USD 715 billion (approx. RM3,289 billion) into AI infrastructure in 2026, diverting DRAM and NAND supply toward high-bandwidth memory for servers. Samsung, SK Hynix, and Micron have shifted capacity to these higher-margin chips, leaving phone makers to compete over limited supply. According to Counterpoint Research and UBS, DRAM prices rose roughly 90 percent in the first quarter alone, and memory can already account for up to 20 percent of a low-end smartphone’s cost, potentially heading toward 40 percent by mid-year. CCS Insight adds that memory now represents more than 30 percent of the bill of materials in some smartphones, a structural change that is pushing the average selling price sharply higher and squeezing out true budget phones.
From Peak Smartphone to Longer Cycles and Second-Hand Alternatives
The memory crisis hit a market that was already cooling. Upgrade cycles had been lengthening as each generation of devices offered smaller feature gains. With rising phone prices and forced premiumization, many consumers now see little reason to replace working devices. IDC describes the situation as “not a temporary squeeze, but a tsunami-like shock originating in the memory supply chain,” and projects a 12.9 percent decline in global smartphone shipments alongside a 14 percent jump in average selling price to USD 523 (approx. RM2,406). As new devices become less affordable, buyers are delaying purchases, keeping phones for close to four years in some mature markets, and increasingly turning to the used smartphone market where prices remain closer to past norms. Organized secondary channels are emerging as a safety valve, absorbing demand from cost-conscious buyers shut out of the primary market.
Budget Phone Shortage and the Compression of the Value Tier
Budget phone shortage pressures are most visible in the entry-level and value tiers, where memory and storage costs make up a large share of the hardware bill. CCS Insight notes that some entry-level devices have already seen sticker prices rise by more than 50 percent, while memory components can exceed 30 percent of total hardware cost. Manufacturers, unwilling to sell at a loss, are exiting or scaling back the cheapest segments, leading to a compressed market where mid-range models start to look like yesterday’s flagships and true low-cost options fade away. In one key market, the sub-USD 100 (approx. RM460) segment collapsed 59 percent year-on-year, even as mid-premium and premium devices grew. This pattern repeats elsewhere: brands are prioritizing margin protection over volume, accepting lower shipments in exchange for higher average selling prices.
Southeast Asia’s Repricing Shock and What Comes Next
Recent numbers from Southeast Asia show how sharply the memory crisis is reshaping regional dynamics. According to Omdia, smartphone shipments in the region fell 9 percent year-on-year in the first quarter, dropping to 21.6 million units. Yet average selling price reached a record USD 349 (approx. RM1,605), up 19 percent over the same period, as memory cost inflation reset device pricing. The divergence between falling volume and rising value signals a structural repricing: vendors are prioritizing higher ASPs and margin protection over unit growth, with several accepting significant volume losses. Samsung grew share with a mix of flagship and A-series models, while brands like Xiaomi and vivo saw double-digit shipment declines after portfolio-wide price increases and a pullback from the most affordable entry-level segment. With CCS Insight forecasting a 15 percent global shipment contraction this year, similar patterns are likely to spread, deepening reliance on the used smartphone market for price-sensitive buyers.
