The global smartphone market is entering a phase in which artificial intelligence is no longer a value-added feature but a force reshaping the underlying economics of devices. Revised projections pointing to lower shipments and higher prices in 2026 reflect not a temporary demand slowdown, but a structural imbalance within the semiconductor supply chain. At YourNewsClub, we see this as the result of a broader reallocation of industry priorities, where AI infrastructure increasingly absorbs resources once dedicated to consumer electronics.
Updated forecasts suggest global smartphone shipments could decline by around 2% in 2026, reversing earlier expectations of flat or modest growth. While shipments are not the same as end sales, they indicate manufacturers’ confidence in demand and their willingness to carry inventory risk. In our assessment at YourNewsClub, the downward revision signals a defensive posture: vendors are adjusting volumes early to avoid margin erosion as component costs continue to rise.
At the same time, pricing expectations have shifted. Average selling prices are now projected to rise by nearly 7% year-on-year, a sharp departure from previous assumptions. This implies that manufacturers no longer believe higher costs can be absorbed internally. From our perspective, this marks a return to a more inflationary consumer electronics environment, where supply-side pressure is increasingly passed on to buyers.
The core constraint remains memory, particularly DRAM. The global build-out of AI data centers has driven a surge in demand for high-performance memory modules – the same class of components required by modern smartphones, especially as on-device AI workloads expand. At YourNewsClub, we view this as a direct collision between two markets competing for the same strategic inputs, rather than a cyclical shortage that can be resolved quickly.
Lower-priced smartphones are proving especially vulnerable. Component costs in the budget segment have already risen by 20–30% since the start of the year, compared with increases of 10–15% in mid-range and premium devices. In our reading, this undermines the long-standing role of entry-level phones as volume stabilizers. They now face the greatest pressure because they offer the least room to offset rising costs without sacrificing quality.
“When memory and computation become infrastructure for AI, they stop being neutral components,” says Owen Radner, who views digital infrastructure as the new transport system of the global economy. From his perspective, smartphones are now competing directly with data centers for access to these computational flows – and consumer devices are losing that contest.
Forward-looking projections reinforce this dynamic. Memory prices could rise by as much as 40% by mid-2026, even from today’s elevated levels, potentially adding another 8–15% to overall component costs. At Your News Club, we believe this leaves manufacturers with a narrow set of options: raise retail prices, quietly downgrade specifications, or shift product strategy toward higher-priced models with stronger margins.
This environment widens the gap between market leaders and the rest. Companies with scale and vertical integration – most notably Apple and Samsung – retain flexibility through long-term supply agreements and portfolio balance. By contrast, second-tier brands, particularly those concentrated in the mid- and low-end segments, face far tighter constraints.
“When material and energy inputs rise faster than end demand, advantage flows to those who control access to those inputs,” says Freddy Camacho, who analyzes production chains as a political economy of computation. In our view at YourNewsClub, this explains why pricing pressure is most acute for manufacturers with limited bargaining power and weaker brand insulation.
One likely side effect is gradual product degradation. Cost-cutting through lower-quality cameras, displays or audio components – or the reuse of older parts – can preserve price points in the short term but erodes consumer trust over time. While such tactics may stabilize shipments temporarily, they risk accelerating longer-term market consolidation.
Our conclusion at YourNewsClub is that higher smartphone prices in 2026 are increasingly a base case rather than an outlier scenario. Artificial intelligence is reshaping semiconductor priorities, and consumer devices are no longer at the center of that ecosystem. We expect the market to become more polarized: premium devices will grow more expensive and more capable, while the mass market either contracts or accepts lower specifications.
The practical implication is straightforward. Consumers who do not require cutting-edge features may benefit from upgrading earlier, before pricing pressure fully materializes. Manufacturers, meanwhile, will be forced to choose between defending volumes and protecting brand credibility. In a world where memory has become a strategic asset, trade-offs are no longer hidden – they are built directly into the product.