Where the damage concentrates

• The steepest declines should occur in budget-oriented brands and low-to-mid-tier devices, where memory is a large share of the bill of materials and consumers have little tolerance for price increases. Transsion, Xiaomi and Honor are particularly exposed; Counterpoint’s earlier outlook flagged sharp shipment declines for those vendors.

• The sub-$150 segment is most vulnerable, especially in emerging markets. In practical terms, vendors will either remove some entry models, reduce memory configurations, raise prices, or let shipments fall—accelerating consolidation and longer replacement cycles.

• Xiaomi, Vivo, Honor and Oppo are therefore likely to emphasize premiumization: fewer low-margin entry devices, more upper-midrange/premium models, more selective country and channel investment, and tighter portfolios. The early evidence supports this pressure: Xiaomi, Oppo and Vivo had the steepest Q2 shipment declines among the top five globally, while India data showed year-on-year shipment declines for Vivo, Realme, Xiaomi and Oppo.

Market and regional outlook

• Counterpoint’s May forecast called for global smartphone shipments to fall 13.9% in 2026 to 1.08 billion units—the lowest annual total since 2013—after the worsening memory crisis overtook its prior forecast.

• The weakness was already visible in Q2: Counterpoint’s early estimate showed global shipments down 11% year on year, the lowest second-quarter level since 2013.

• Latin America declined 10% year on year in Q2 2026, as vendors pulled back after earlier inventory building ahead of anticipated price adjustments; Samsung and Apple were the notable large-brand exceptions with growth.

• Europe also fell 10% year on year in Q2, to a three-year second-quarter low. Apple and Samsung were more resilient there, while Xiaomi, Oppo and Honor lost share.

Why features will not create a broad supercycle

• AI features can help premium-device differentiation and improve mix, but they do not create enough affordable supply or offset sharply rising memory costs. A foldable iPhone could expand Apple’s premium opportunity, but it would be a high-price, limited-volume product—not a mechanism for a market-wide shipment boom.

• Thus, the 2026–27 outlook is supply-led: memory allocation to more profitable AI/server uses, memory availability, contract pricing and OEM purchasing power will determine output. Consumer demand matters mainly at the margin once higher handset prices meet affordability limits.

• A broader rebound is more plausible in 2028, once memory supply normalizes and deferred replacement demand can return. Until then, the likely result is fewer brands, fewer entry models, higher average selling prices and market-share gains for Samsung and Apple.

Where the damage concentrates

• The steepest declines should occur in budget-oriented brands and low-to-mid-tier devices, where memory is a large share of the bill of materials and consumers have little tolerance for price increases. Transsion, Xiaomi and Honor are particularly exposed; Counterpoint’s earlier outlook flagged sharp shipment declines for those vendors.

• The sub-$150 segment is most vulnerable, especially in emerging markets. In practical terms, vendors will either remove some entry models, reduce memory configurations, raise prices, or let shipments fall—accelerating consolidation and longer replacement cycles.

• Xiaomi, Vivo, Honor and Oppo are therefore likely to emphasize premiumization: fewer low-margin entry devices, more upper-midrange/premium models, more selective country and channel investment, and tighter portfolios. The early evidence supports this pressure: Xiaomi, Oppo and Vivo had the steepest Q2 shipment declines among the top five globally, while India data showed year-on-year shipment declines for Vivo, Realme, Xiaomi and Oppo.

Market and regional outlook

• Counterpoint’s May forecast called for global smartphone shipments to fall 13.9% in 2026 to 1.08 billion units—the lowest annual total since 2013—after the worsening memory crisis overtook its prior forecast.

• The weakness was already visible in Q2: Counterpoint’s early estimate showed global shipments down 11% year on year, the lowest second-quarter level since 2013.

• Latin America declined 10% year on year in Q2 2026, as vendors pulled back after earlier inventory building ahead of anticipated price adjustments; Samsung and Apple were the notable large-brand exceptions with growth.

• Europe also fell 10% year on year in Q2, to a three-year second-quarter low. Apple and Samsung were more resilient there, while Xiaomi, Oppo and Honor lost share.

Why features will not create a broad supercycle

• AI features can help premium-device differentiation and improve mix, but they do not create enough affordable supply or offset sharply rising memory costs. A foldable iPhone could expand Apple’s premium opportunity, but it would be a high-price, limited-volume product—not a mechanism for a market-wide shipment boom.

• Thus, the 2026–27 outlook is supply-led: memory allocation to more profitable AI/server uses, memory availability, contract pricing and OEM purchasing power will determine output. Consumer demand matters mainly at the margin once higher handset prices meet affordability limits.

• A broader rebound is more plausible in 2028, once memory supply normalizes and deferred replacement demand can return. Until then, the likely result is fewer brands, fewer entry models, higher average selling prices and market-share gains for Samsung and Apple.