IDC, the technology market research firm, said the cheap smartphone era is over and will not return.
Technology market research and intelligence firm International Data Corporation (IDC) said that the days of cheap smartphones are rapidly ending and will not return.
“The smartphone market has changed character this year. Units are dropping while prices are climbing sharply, with consumers expected to absorb the cost,” IDC said.
“According to IDC’s Worldwide Quarterly Mobile Phone Tracker, worldwide smartphone shipments will fall 16.7% in 2026 to just over 1 billion units.”
That is a sharp downgrade from the 13.9% decline IDC forecast only one quarter ago, and it is the steepest annual contraction the industry has ever recorded.
“What makes this moment unusual is that the market is shrinking and getting more valuable at the same time,” IDC said.
“Total market value will still grow 6.3% to $613 billion, because higher prices are now doing the heavy lifting that volume once did.”
IDC explained that the memory shortage, which started in late 2025, was striking hard in the second half of 2026, with shipments forecast to drop by 27.2% year on year.
NAND and DRAM costs continue to rise, up over 300% year on year, and vendors are running out of options to absorb the increased costs.
“As memory prices are expected to continue increasing until at least 2028, vendors are adapting their portfolios to a permanently higher cost structure,” IDC said.
“The 173 million smartphones below $100, which shipped last year, are facing an existential crisis.”
Android players focused on low-end devices, which were already operating on razor-thin margins, are cutting low-end models and pushing a higher-end product mix.
In the second quarter of 2026, this segment saw an almost 60% year-on-year drop and is expected to fall faster in the second half.
IDC said its forecast for smartphone prices has moved the most in the past quarter as the AI-induced shortage of memory chips continued to bite.
“The average selling price of a smartphone will reach $581 in 2026, up 27.6% in a single year and revised upward from the $550 projected last quarter,” it said.
“More brands are passing the increased cost to the end consumer, with prices rising faster than expected.”
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The premium end will remain more resilient to price hikes because long-term interest-free financing options are more prevalent in developed markets such as the US and the UK.
“The mass market does not hold up, especially in emerging markets, which are expected to drop over 20% this year. This is why the unit decline continues to deepen while the value line keeps rising.”
IDC said the average handset now costs roughly $147 more than it did a couple of years ago, and the cheapest models are the ones leaving the shelves fastest.
Buyers in price-sensitive markets will feel this loss the most, as the sub-$100 phones many of them relied on are being cut from vendor line-ups.
In South Africa, some retailers are already prepared for this new reality thanks to their smartphone leasing and rent-to-own credit products.
Although these were introduced in response to the cost-of-living crisis, which ate into consumers’ discretionary spending, smartphone rental services are well-positioned for the price revolution about to hit.
“The memory tsunami that we warned about is now hitting the market in full, and consumers are starting to pay the AI bill,” said Francisco Jeronimo, IDC vice president for worldwide client devices.
“The components that make AI possible are the same ones in short supply, and their cost is being passed straight through to the shelf.”
“The era of the cheap smartphone has ended. From here, the winners will be the vendors with the scale and supply leverage to hold demand at prices consumers have never had to pay before.”
IDC said the next 18 months will separate the vendors who can operate in a structurally more expensive market from those who cannot.
Apple, Samsung, and Huawei have the scale and pricing power to turn this challenge to their advantage.
Smaller Android brands anchored in the entry tiers face the hardest stretch in the industry’s history, and some will not clear it.
The market that emerges on the other side of the crisis, when the memory supply finally stabilises in 2028, will be smaller in units, larger in value, and far more concentrated at the top.
“The cheap smartphone era is not pausing. It is over,” IDC said.
