Smartphone sales fell 6% in Q1, as the shortage of memory chips began to impact the market:
- Sales are now down 20% versus their peak annual volume in 2017 as the chart shows
- Apple’s annualised sales have grown 15% over the period to 247m
- But Samsung has lost No 1 position, with its sales falling 23% to 238m
2026 smartphone sales now seem set to fall by double digit levels as the Strait of Hormuz closure impacts consumer budgets.
SAMSUNG HAS LOST OUT TO LOW-COST CHINESE SUPPLIERS
Samsung used to dominate the market with a 35% share in 2013. But that fell to just 20% in Q1 2026. The issue is affordability:
- Apple has always focused on the high-end of the market as the Counterpoint chart shows
- Its Average Selling Price was $908 in Q1, versus the average of just $399
- But Samsung focused on offering Affordable Luxury to the Middle Market
- Its prices are close to the average at $340, but it is getting squeezed by Chinese competition
- The main Chinese players are much lower for a similar product – Xiaomi ($156), Vivo ($227), Oppo ($240)
THE MIDDLE GROUND IS NOW DISAPPEARING IN CONSUMER MARKETS
Essentially, consumer markets are now reverting to a K-shaped model as the chart shows:
- Richer people can still afford Luxury items such as an Apple iPhone
- But the middle ground of Affordable Luxury that Samsung occupied is now disappearing
- Instead it has to compete with Chinese companies selling on a low-cost, Value basis. And it is losing out.
CHINA’S MARKET IS NOW BEING HIT BY MUCH HIGHER CHIP PRICES
China is the world’s largest smartphone market, and confirms the global trend as the Counterpoint chart shows.
Sales fell 4% as government subsidies ended. And March saw the start of major dislocation with the closure of the Strait of Hormuz.
China is potentially in the ‘eye of the storm’ as component prices rise due to the combined impact of AI demand and the closure. As IDC note:
“Memory chip constraints have directly hit output and consumer demand, marking one of the market’s most challenging periods. Surging component prices have inflated bill-of-materials costs, forcing major brands to raise retail prices.”
Chinese brands have been reliant on low- to mid-tier markets. And so they have so far absorbed the brunt of the supply shock. But much more is to come, as the South China Morning Post reports:
“Conventional dynamic random access memory (DRAM) contract prices were expected to climb 58 to 63 per cent quarter on quarter in the second quarter of 2026, while NAND flash prices could jump 70 to 75 per cent, driven primarily by demand from AI and data centres”.*
Inevitably, therefore, China’s Value producers will further squeeze Samsung (and maybe Apple?), as they are forced to shift to more premium products, to help pass on higher prices.
And at the same time, of course, consumers will be cutting back. So sales of new smartphones will likely continue to weaken, as buyers refocus on cheaper used phones.
*DRAM is the fast, short-term memory that enables devices such as smartphones, PCs and servers to run applications, while NAND flash provides longer-term storage for data such as photos and files.