Global smartphone sales have suffered their biggest recorded quarterly decline, falling 22% as soaring memory chip prices linked to the artificial intelligence boom push handset costs higher and force consumers to delay upgrades.
According to research firm International Data Corporation (IDC), smartphone shipments fell to 255 million units in the three months to September 2026, marking the weakest quarterly performance since 2013.
The sharp contraction has affected manufacturers across the industry, with Samsung reporting a 5.8% decline and Apple recording a 4% fall, while companies specialising in lower-cost smartphones for developing markets experienced significantly larger reductions.
At the centre of the downturn is a global shortage of memory chips, as technology manufacturers increasingly prioritise components used in artificial intelligence data centres.
Memory chip prices have reportedly risen more than fourfold during 2026, with some component costs increasing by 350%, placing substantial pressure on smartphone production costs.
The surge reflects growing demand for high-performance memory used to train and operate AI systems, with major suppliers including Samsung, SK Hynix and Micron directing more manufacturing capacity towards higher-margin data centre products.
This shift has reduced the availability of memory components used in smartphones, computers and other consumer electronics, forcing manufacturers to absorb rising costs or pass increases on to customers.
Apple increased iPhone prices by £100 in September, highlighting the impact of component inflation even on premium smartphone brands.
Smaller manufacturers have faced similar pressures. British smartphone company Nothing has reduced memory and storage specifications on some newer devices to manage production costs.
Nothing Chief Executive Carl Pei previously warned that the rapid expansion of artificial intelligence had fundamentally changed demand for semiconductor components, bringing an end to the era of consistently cheap memory.
IDC analyst Francisco Jeronimo said manufacturers initially attempted to delay price increases and absorb higher costs through reduced profit margins, but sustained component inflation had made that approach increasingly difficult.
Consumers are now keeping their existing smartphones for longer, rather than upgrading to increasingly expensive new devices.
The disruption extends beyond smartphones, with rising memory costs also affecting video game consoles, medical equipment and the automotive industry, where manufacturers have warned of substantial additional expenditure.
The 22% quarterly decline exceeds the previous record downturn recorded in 2022, when pandemic-related disruptions and Chinese factory lockdowns weighed heavily on smartphone production and demand.
IDC warned that memory prices remain under upward pressure, suggesting the industry could face further challenges into 2027 unless supply conditions improve.
For semiconductor manufacturers, the AI boom has created substantial opportunities through stronger demand and higher selling prices, but consumer electronics companies face shrinking margins and weakening sales volumes.
The smartphone downturn highlights a growing imbalance in the global technology industry, where investment in artificial intelligence infrastructure is increasing costs for traditional electronics manufacturers and ultimately consumers.
With memory supply increasingly directed towards AI applications, the outlook for smartphone sales will depend heavily on component availability, pricing and whether manufacturers can restore affordability without sacrificing profitability.
