"Chipflation Means Selling at a Loss" — The Smartphone Market Faces Its Harshest Freeze Ever This Year

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[Financial News] The global smartphone market is expected to face its harshest freeze ever this year. Rising component prices, including DRAM and NAND flash memory, along with the fallout from the war between the United States and Iran, are expected to sharply increase cost burdens and weaken demand. Manufacturers are scrambling to find survival strategies, including shifting sales toward more profitable premium products.
According to market research firm International Data Corporation (IDC) on the 28th, global smartphone shipments this year are expected to fall 13.9% from a year earlier to 1.09 billion units. That would mark the largest annual decline on record. The forecast suggests demand will weaken even further than the -12.9% estimate released in February.
As uncertainty at home and abroad deepens and smartphone prices rise sharply, consumers are tightening their wallets. The year-on-year growth rate of global smartphone shipments is falling steeply, from 6.2% in 2024 to 2.0% in 2025. Shipments are expected to decline for two straight years through 2027, when they are projected to fall 1.1%, before rebounding only in 2028, when memory supply shortages ease and shipments are forecast to rise 5.5%.
The burden on costs has surged as the prolonged shortage of memory semiconductors has been compounded by higher oil prices and rising transportation costs after the war between the United States and Iran.
The average selling price of smartphones this year is expected to reach $550, a record high. That is $100 more than last year.
With little margin left even when they sell, smartphone makers are cutting shipments and reshaping their sales strategies around premium models rather than lower-margin midrange and budget devices. In North America, where premium demand is especially strong, smartphone shipments this year are expected to fall only 6.3% from a year earlier. Premium devices priced at $800 or more are also projected to account for 60% of total smartphone shipments in the first quarter of this year.
The outlook is also diverging among smartphone makers. Samsung Electronics, which has a high share of premium products such as the Galaxy S and Galaxy Z Fold, is seen as well positioned to gain market share. Its strengths include stable memory supply capabilities, a stronger Samsung Galaxy S26 lineup, and an aggressive position in the midrange and budget segment. Apple Inc. is also expected to cushion the decline in shipments, supported by strong sales of the iPhone 17 series in major global markets, including China.
Even amid the overall market slowdown, foldable phones are expected to grow 20% this year from a year earlier. That is because Apple Inc. is preparing to enter a market that has so far been dominated by Samsung Electronics and Chinese manufacturers. Apple is set to release its first foldable iPhone in the second half of this year. In response, Samsung Electronics will hold Galaxy Unpacked in July to unveil next-generation foldable phones such as the Samsung Galaxy Z Fold 8 and Galaxy Z Flip 8, as well as new form factors like the wider Galaxy Z Fold 8 Wide.
mkchang@fnnews.com Jang Min-kwon Reporter