Memory chip shortage cuts smartphone shipments 10% as AI devours supply

Memory prices have more than doubled since October 2025, and the AI boom is consuming 70% of global production — leaving smartphone makers scrambling for what's left.

Goldman Sachs cut its 2026 global smartphone shipment forecast by 4% to 1.14 billion units, expanding the projected year-over-year decline to 10%, as surging memory chip costs from AI-driven demand squeeze consumer electronics supply chains.

"Rising memory costs are the primary driver of our softer outlook, as AI industry demand has diverted capacity away from consumer-grade chips," Goldman Sachs analysts wrote in a June 20 report.

Memory prices have more than doubled since October 2025, with DRAM costs projected to climb another 30% to 40% in 2026. Data centers are expected to consume 70% of total memory production this year, leaving smartphone makers, PC manufacturers and consumer electronics companies fighting over the remaining 30%.

The supply crunch is already hitting consumers. Apple raised MacBook prices by as much as $400, and Chief Executive Officer Tim Cook called further increases "unavoidable." With Micron Technology, SK Hynix and Samsung Electronics diverting production lines to high-bandwidth memory for AI servers, the question is not whether device prices will rise — but by how much before demand breaks.

Premium shift masks volume decline

Despite the volume cuts, Goldman Sachs expects the smartphone market's value to keep growing — a 3% rise to $596 billion in 2026, followed by 2% increases each in 2027 and 2028. Higher memory costs and a shift toward premium phones priced above $600 support revenue growth even as unit sales fall.

The bank projects premium smartphones above $600 will grow at a 5% compound annual rate through 2028, reaching 402 million units and accounting for 34% of total volume, up from 29% in 2025. Apple is forecast to maintain its global lead with 246 million units sold in 2026, followed by Samsung at 235 million.

The mid-range segment, priced between $200 and $600, is expected to shrink at a 2% annual rate as consumers grow more conservative amid a lack of major technology upgrades. Entry-level demand below $200 is forecast to grow modestly, supported by migration from 4G to 5G networks in developing markets — though that segment faces the most exposure to rising memory costs given price-sensitive buyers.

Memory makers are the winners

While consumer electronics companies absorb the pain, the companies making memory chips are having their best stretch in history. Both SK Hynix and Micron are approaching $1 trillion valuations. Micron shares have climbed 298% this year, and the company's fiscal third-quarter earnings on June 24 are seen as a test of how much further the memory rally can go.

The three firms that dominate global memory production — Samsung, SK Hynix and Micron — have pushed cleanroom space and budgets into AI-driven, higher-margin products, leaving less supply for smartphones and PCs. Gartner is warning that soaring memory costs could drag down 2026 smartphone shipments by 8.4% and PC shipments by 10.4%, while pushing smartphone prices up 13% from 2025.

Apple has little control over the dynamic. The company can design its own chips, sign long-term supplier agreements and carry inventory — but it cannot manufacture its own DRAM or NAND. Gene Munster, managing partner at Deepwater Asset Management, told CNBC that Cook bringing up price hikes was "a signal that this is that big of an issue," estimating Apple could push through a 5% to 10% price increase for iPhones.

For investors, the memory shortage creates a clear split. Semiconductor companies selling into the AI infrastructure buildout — Micron, SK Hynix, Samsung — look increasingly attractive as AI demand appears to be a multi-year structural shift rather than a temporary spike. Consumer electronics companies face a more complicated picture: Apple's decision to raise prices tests consumer sensitivity, and if demand softens, the company faces a choice between protecting margins and protecting market share.

This article is for informational purposes only and does not constitute investment advice.