IDC Forecast: The smartphone market is on track for its worst year ever

AI-driven memory shortage continues to hammer sales; Android sales to drop 20%

According to analysis firm IDC, smartphone shipments are headed for a 13.9% decline in 2026, a downward revision from the 12.9% decline IDC had anticipated for the year in February. It would also mark the steepest drop in smartphone history, the company said.

“these pressures are compelling vendors to reduce shipments, raise prices and concentrate on higher price tiers — elevating smartphone [average selling price] to a record $550, up $100 from last year,” IDC senior research director Nabila Popal said in a statement.

“2026 will be a defining year for the industry as [a] new reality of structurally higher costs take hold,” she added. “For consumers, it means the era of ultra-cheap smartphones is over. For vendors, it means only those that can adapt their strategies to this new cost environment and sustain demand at elevated price points will survive.

The broader Android smartphone market is set to take the biggest hit, with IDC projecting a 20% year-over-year drop in shipments. Despite that, Samsung is expected to increase its market share in the space at the expense of smaller smartphone companies thanks to its midrange and premium device lineups.

Apple, the research firm said, is also expected to perform relatively well, with shipments forecast to fall 5.2% on the year, an improvement from a previously anticipated decline of 8.1%.

In its most recent earnings report, Apple announced iPhone revenue growth of 20% for the second consecutive quarter, thanks to its strong iPhone 17 lineup and improved sales out of China.

But CEO Tim Cook also warned of supply constraints due to both the memory shortage and the dearth of iPhone processors.

See also: The Smartphone Market is Cracking.

Source: Yahoo Finance

NB: I would add that Apple also announced that revenues for June quarter would increase at the same rate as they did for March quarter, thus for at least half the year the company will achieve 20% growth in iPhone sales. This is in sharp contrast to both what IDC and Omdia have been reporting.

I am reading the regional reports showing single digit growth for the iPhone in Europe, Latin America and China during the first quarter and months since. Apple is either reporting or forecasting 20% growth during the same period globally. Either Apple is selling in far-flung markets that are not being tracked or the methodologies of the analysts are not working for Apple.

We have to appreciate that the job of the market analysts is not easy. They do not obtain direct sales information but rely on secondary sources such as retail transactions or supply chain or some sampling of distribution. The accuracy is often falsely precise. Especially with respect to Apple which uses much of its own distribution: Apple stores both physical and online.

IDC forecast of 5% drop for the iPhone is actually a concession to increasingly positive data from Apple. They adjusted from a decline of 8%. Simultaneously they are adjusting Android sales down sharply. Samsung may manage through this period but it looks increasingly grim for other Android vendors.

Then there is the ASP.

“That’s elevating smartphone [average selling prices] to a record $550, up $100 from last year,” she said. According to IDC, Apple was better prepared than peers for the global chip shortage

“Apple has done three things that few of its competitors have managed: it secured memory supply early, it built a portfolio strong enough to drive a remarkable turnaround in China, and it positioned the iPhone 17 to capture demand exactly when consumers in developed markets are extending replacement cycles and trading up,” Francisco Jeronimo, vice president for worldwide client devices at IDC, wrote.

I don't think Apple anticipated or acted differently in this cycle. They started down the road for the 17 much more than a year ago, well before the memory crisis was anticipated. Scale alone ensured that they secure supply and position as they do. As always, Apple does not come to the market. The market comes to Apple.

All analysis agree implicitly that Apple will gain significant share this year. Whether that turns into a permanent shift depends on many things. Almost all new iPhone users will stick with the platform but they may extend their buying cycle as the products last longer.

As was the case with Covid, a crisis favors the strong. What is portrayed as an economic crisis, somehow leads to the priciest products gaining share. This is not a contradiction as it seems. In times of uncertainty a flight to value make a lot of sense.