Goldman's 10% decline for 2026 is more conservative than IDC's projection of a 13.9% drop to 1.09 billion units, which would mark the lowest annual volume in more than a decade . Counterpoint Research meanwhile forecasts a 12.4% decline . The variation among analysts reflects uncertainty about how quickly memory supply constraints will ease.

Root Cause: The AI-Driven Memory Upcycle

The primary driver of the downward revision is a severe and sustained shortage of memory chips — DRAM, NAND flash, and high-bandwidth memory (HBM) — caused by AI-driven data center demand . Goldman Sachs argues this is not a short-lived disruption but a structural upcycle lasting through at least 2028 .

Memory prices have skyrocketed. TrendForce reported that conventional DRAM contract prices surged 90–95% quarter-on-quarter in Q1 2026, while NAND flash jumped 55–60% . For a mainstream 8GB + 256GB configuration, contract prices in Q1 2026 nearly tripled year-over-year . As a result, memory now accounts for 30–40% of a smartphone's bill of materials, up from the historical 10–15% .

Consequences: Record Decline and Market Consolidation

The consequences ripple across the entire smartphone ecosystem:

Steepest annual decline on record. The 10% drop in 2026 would be the largest single-year contraction in the smartphone market's history . IDC data indicates the market is headed toward its lowest annual shipment total since before the modern smartphone era .

Higher prices for consumers. Average smartphone selling prices are expected to rise 7–14% in 2026 . Counterpoint Research estimates a 6.9% increase in ASP , while IDC projects an ASP of $523, a record high .

Market consolidation. Smaller players, especially in emerging markets, are expected to exit or sharply reduce production . IDC noted "consolidation as smaller players exit, and low-end vendors face sharp shipment declines amid supply constraints and lower demand at higher price points" .

The Premium Segment: A Silver Lining

Despite the broad contraction, Goldman Sachs expects the product mix to continue shifting toward higher-end devices . Premium phones are more resilient because:

• Higher margins allow flagship makers to absorb more of the memory cost increases.
• Less price-sensitive buyers in the premium segment maintain demand even as prices rise .
• Overall market revenue is expected to decline less sharply than unit volume, as rising ASPs partially offset shipment losses .

Real-World Impact: Budget Phones Under Threat

The most dramatic effect is on low-cost smartphones, particularly in Asia. CNET's coverage from MWC 2026 reported that "the RAM shortage could kill budget phones," as manufacturers can no longer absorb soaring memory costs without pricing devices beyond what entry-level buyers can afford .

TechWire Asia noted that manufacturers of devices priced around $100–$150 face an impossible choice: raise prices significantly, strip out standard features, or exit the market entirely . IDC warned that rising component costs could make the sub-$100 smartphone "permanently uneconomical" . Smaller Asian brands have already begun reducing production of sub-$150 models .

The Road Ahead

Goldman Sachs forecasts a slow recovery. After the 10% decline in 2026, shipments are expected to grow just 3% in 2027 and 1% in 2028, reaching 1.18 billion units . The bank's view that memory supply-demand imbalances will persist through at least 2028 suggests price pressures on the smartphone market are likely structural, not cyclical .

Goldman's 10% decline for 2026 is more conservative than IDC's projection of a 13.9% drop to 1.09 billion units, which would mark the lowest annual volume in more than a decade . Counterpoint Research meanwhile forecasts a 12.4% decline . The variation among analysts reflects uncertainty about how quickly memory supply constraints will ease.

Root Cause: The AI-Driven Memory Upcycle

The primary driver of the downward revision is a severe and sustained shortage of memory chips — DRAM, NAND flash, and high-bandwidth memory (HBM) — caused by AI-driven data center demand . Goldman Sachs argues this is not a short-lived disruption but a structural upcycle lasting through at least 2028 .

Memory prices have skyrocketed. TrendForce reported that conventional DRAM contract prices surged 90–95% quarter-on-quarter in Q1 2026, while NAND flash jumped 55–60% . For a mainstream 8GB + 256GB configuration, contract prices in Q1 2026 nearly tripled year-over-year . As a result, memory now accounts for 30–40% of a smartphone's bill of materials, up from the historical 10–15% .

Consequences: Record Decline and Market Consolidation

The consequences ripple across the entire smartphone ecosystem:

Steepest annual decline on record. The 10% drop in 2026 would be the largest single-year contraction in the smartphone market's history . IDC data indicates the market is headed toward its lowest annual shipment total since before the modern smartphone era .

Higher prices for consumers. Average smartphone selling prices are expected to rise 7–14% in 2026 . Counterpoint Research estimates a 6.9% increase in ASP , while IDC projects an ASP of $523, a record high .

Market consolidation. Smaller players, especially in emerging markets, are expected to exit or sharply reduce production . IDC noted "consolidation as smaller players exit, and low-end vendors face sharp shipment declines amid supply constraints and lower demand at higher price points" .

The Premium Segment: A Silver Lining

Despite the broad contraction, Goldman Sachs expects the product mix to continue shifting toward higher-end devices . Premium phones are more resilient because:

• Higher margins allow flagship makers to absorb more of the memory cost increases.
• Less price-sensitive buyers in the premium segment maintain demand even as prices rise .
• Overall market revenue is expected to decline less sharply than unit volume, as rising ASPs partially offset shipment losses .

Real-World Impact: Budget Phones Under Threat

The most dramatic effect is on low-cost smartphones, particularly in Asia. CNET's coverage from MWC 2026 reported that "the RAM shortage could kill budget phones," as manufacturers can no longer absorb soaring memory costs without pricing devices beyond what entry-level buyers can afford .

TechWire Asia noted that manufacturers of devices priced around $100–$150 face an impossible choice: raise prices significantly, strip out standard features, or exit the market entirely . IDC warned that rising component costs could make the sub-$100 smartphone "permanently uneconomical" . Smaller Asian brands have already begun reducing production of sub-$150 models .

The Road Ahead

Goldman Sachs forecasts a slow recovery. After the 10% decline in 2026, shipments are expected to grow just 3% in 2027 and 1% in 2028, reaching 1.18 billion units . The bank's view that memory supply-demand imbalances will persist through at least 2028 suggests price pressures on the smartphone market are likely structural, not cyclical .