According to the latest market analyses provided by Counterpoint Research, the global shipments of smartphone chipsets will suffer a 7% contraction.
In a normal context, a decline in volumes of this magnitude would trigger alarm bells in the boardrooms of major manufacturers; however, forecasts indicate a double-digit revenue growth.
This apparent contradiction reveals a transformation of sales strategies: fewer devices will be sold, but at decidedly higher prices, sacrificing the most affordable tier of the market.
Smartphone market: Sacrificing the budget tier on the altar of AI
The main reason for this decline in shipments does not lie in a lack of consumer interest, but in a shift in industrial priorities toward data centers.
With artificial intelligence permeating every tech sector, semiconductor manufacturers are massively reallocating their resources to produce high-bandwidth memory (HBM), essential for the huge server farms powering modern algorithms.
This migration has generated a domino effect on memory prices of standard DRAM memories, whose costs have risen sharply.
For smartphone makers, this rise in component costs makes it increasingly difficult to assemble affordable phones without taking a loss.
The report highlights that the most affected segment will be devices under $150. Profit margins on these products are so slim that the memory price increases render them economically unsustainable.
Consequently, companies are shifting their efforts toward high-end models, where margins are wide enough to absorb the increases and generate substantial profits.
The battle will shift to proprietary chips
While the low end suffers, the high end accelerates technology innovation with the move from 3 nm process nodes to 2 nm.
Samsung has already opened the challenge in this field with the Exynos 2600, which positions itself as the world’s first 2nm GAA chipset, forcing giants like Apple and Qualcomm to chase to stay competitive.
Despite these moves, MediaTek continues to hold the throne for market volume. Thanks to its strong presence in the budget and mid-range segments, the Taiwanese manufacturer should maintain a 34% market share in 2026.
Even though this represents a slight decline compared to the previous year, the strategy of using ARM designs for its Dimensity 9600 allows the company to keep more aggressive prices compared to Qualcomm’s custom solutions.
Qualcomm maintains a solid second place with almost a quarter of the market, while Apple continues to lead the premium segment with 18.1%. Notably, Samsung’s move is interesting, the only major player growing, reaching a 12.1% share by focusing more on its own chips and reducing dependency on external suppliers.
A two-tier user experience
For the end user planning to upgrade their device in 2026, the outlook is bittersweet. High-end phones, which will account for about a third of the total market and surpass the $500 threshold, will offer unprecedented performance.
These devices are expected to reach 100 TOPS (trillion operations per second) in on-device AI performance, enabling 90% of premium models to perform complex AI tasks without the need for an internet connection.
Conversely, those targeting the mid-range, between $100 and $500, will experience a different technological experience. To contain costs, manufacturers will rely on cloud offloading, forcing these devices to depend on remote servers for advanced artificial intelligence features.
As shipments gradually recover, which probably won’t occur before 2027, brands will simplify their product lines, pushing proprietary chips such as Google’s Tensor or Samsung’s Exynos and justifying higher price tags with promises of superior performance.
