The global smartphone market has hit a major setback, with shipments falling 20% year-on-year in the third quarter of 2026. Preliminary estimates from Counterpoint Research show that shipments dropped to their lowest third-quarter level since 2012, as a shortage of memory chips pushed up manufacturing costs and forced brands to rethink their sales strategies.
The problem is closely linked to the AI boom. Growing demand for memory components from AI infrastructure projects is tightening supplies for smartphone manufacturers, leaving companies with fewer options to control costs without raising prices or cutting production.
AI Demand Pushes Up Smartphone Prices
Memory chips are essential to smartphone performance, helping devices run applications, store data and manage multiple tasks. However, as chipmakers allocate more capacity to meet demand from AI data centres, smartphone brands are facing increasingly expensive components.
Counterpoint estimated that global smartphone retail prices have risen around 20% so far in 2026. Higher prices are putting pressure on buyers, particularly those shopping for budget and mid-range phones. Manufacturers are responding by adjusting product portfolios, reducing shipments and prioritising profitability over sales volumes.
Samsung Leads as Apple Reaches 22% Share
Samsung maintained its title as the top vendor of smartphones globally, accounting for a 23% share of the market during the third quarter. This was down only 3% compared to the same period last year, following its popularity of the Galaxy Z Fold8 range and availability of mid-end phones.
Apple was close behind with 22% of the market, marking the first time that the company has surpassed the 20% mark in the third quarter despite reduced shipments. The fall in shipments was partially blamed on the lack of a standard iPhone 18, unlike the range available last year of the iPhone 17 range.
Also Read: India Smartphone Shipments Rise Despite Price Hikes in Q2 2026
Xiaomi, Oppo and Vivo Face Bigger Declines
Chinese manufacturers experienced steeper setbacks. Xiaomi's shipments fell by more than 30%, reducing its market share to 10%. Oppo and vivo also recorded declines exceeding 20%, with respective shares of 9% and 8%.
These brands have been raising prices, cutting exposure to less profitable products and concentrating on markets where returns are stronger. However, such moves could make affordable smartphones harder to find.