Smartphone Shipments Hit Historic Lows as Memory Shortage Hits Manufacturers

Smartphone shipments started to plateau a few years back, ending the days of guaranteed double-digit growth for any company that wanted to make phones. Fewer smartphone manufacturers exist today, and they're facing new pressure in the age of AI. A new report claims that smartphone shipments cratered 11 percent in the last quarter.

Some are weathering the storm better than others, though. According to Counterpoint, this substantial drop brings smartphone shipments to their lowest second-quarter level since 2013. Analysts place the blame for this drop squarely on the increasing price of DRAM and NAND chips.

Manufacturers have largely shifted to supporting the AI computing boom, which leaves fewer components for consumer devices like smartphones and PCs. As prices climb higher, fewer people are interested in buying new phones. This problem has been particularly vexing for people who are happy to purchase budget devices.

A recent report from market research firm Omdia noted that higher memory costs are particularly bad for phones priced at $500 or less. In these segments, memory can now easily account for half of the total manufacturing cost. These devices have seen quicker and larger price increases compared to flagship devices, for which memory is now more than a quarter of the cost.

That's a significant increase in the past year, but there's still more profit to be had at the high end. The current memory shortage and its impact on smartphone shipments will disproportionately affect manufacturers that rely heavily on budget devices. Apple and Samsung, with their premium product lines, are likely to weather the storm better than their competitors.

The memory shortage may also accelerate the trend towards more expensive devices, as manufacturers seek to maintain profit margins. As the industry adapts to the AI computing boom, questions remain about the long-term impact on smartphone innovation and consumer affordability. With memory costs unlikely to decrease in the near future, manufacturers will need to find new ways to balance costs and features to remain competitive.