Global smartphone shipments hit 13-year low as 'chipflation' sends prices soaring

Park, a 33-year-old office worker, has been using the Samsung Electronics Galaxy S22 he bought in early 2022 for more than four years. He used to upgrade his smartphone every two years, but when the time came to replace it, the price tag — well above 1 million won ($664) — gave him pause. "It's expensive, and while it doesn't have the latest features, it still works fine for what I need, so I keep putting off the upgrade," he said.

Global smartphone shipments in the second quarter hit their lowest level in 13 years, driven by what the industry calls "chipflation" — a portmanteau of memory chip and inflation.

Rising smartphone prices, fueled by a shortage of memory chips, have dampened consumer demand. Samsung Electronics' new Galaxy S26 Ultra (1TB) carries a suggested retail price of 2.54 million won, up more than 1.5 million won from the 990,000-won launch price of the base Galaxy S22 (256GB) released in 2022.

Budget smartphone makers including Xiaomi, Oppo and Vivo were hit hardest, posting sharp declines in shipments. Samsung Electronics and Apple, by contrast, expanded their market share despite the overall market contraction.

According to market research firm Counterpoint Research, global smartphone shipments fell 11 percent year-on-year in the second quarter — the lowest second-quarter figure in 13 years, since 2013.

Industry observers say chipflation-driven memory shortages have begun to squeeze actual consumer demand. As memory chip makers shifted their DRAM and NAND supply toward AI data centers, memory prices climbed sharply throughout the second quarter. Smartphone manufacturers passed the higher component costs on to consumers, further eroding demand.

"The global memory supply crunch, which last year was limited to a simple component supply issue, has now expanded to the point where it is suppressing consumer demand," said Counterpoint Research analyst Silpi Ani.

Budget smartphone makers bore the brunt of the downturn. Xiaomi, Oppo and Vivo all posted double-digit shipment declines year-on-year in the second quarter, and their market shares fell accordingly — Xiaomi dropped from 14 percent to 12 percent, Oppo from 12 percent to 11 percent, and Vivo from 9 percent to 8 percent. All three companies rely heavily on entry-level models in their lineups, making them particularly vulnerable to rising memory prices.

The developments confirm earlier predictions that chipflation would hit the budget segment hardest. IDC, another market research firm, forecast in May that chipflation would deal the sharpest blow not to the premium segment but to the sub-$200 budget smartphone market. Margins in that segment are already thin, making price increases unavoidable when costs rise — yet budget buyers are the most price-sensitive consumers, making those increases the hardest to pass on.

"Cost pressures are forcing vendors to cut shipments, raise prices and focus on higher-end product lines," said Nabila Popal, IDC's research director. "The era of ultra-cheap smartphones is over. Only those who can sustain demand at higher price points will survive."

Samsung Electronics and Apple, meanwhile, absorbed the market share shed by budget players and extended their dominance. Samsung Electronics reclaimed the top spot with a second-quarter market share of 24 percent, up 4 percentage points year-on-year. Apple also rose 3 percentage points, from 17 percent to 20 percent, but finished second.

Counterpoint Research expects the smartphone market to remain under pressure in the second half of the year, forecasting an annual shipment decline of around 14 percent and projecting that the global memory shortage will persist into next year.