Smartphone shipments hit 13-year low in Q2 as AI memory shortage hammers industry

Smartphone shipments hit their worst skip in 13 years, as the memory shortage continued to hammer the industry.

Global smartphone shipments fell in the second quarter, as the memory and storage shortage continues to bite into consumer technology industries. According to Counterpoint Research, smartphone shipments declined 11% year over year, marking the segment's worst second quarter in 13 years. "The global memory crisis has now overtaken every other factor as the single biggest drag on the smartphone industry.

What started as a components issue last year is now a full-blown demand issue," Counterpoint Research senior analyst Shilpi Jain said in a statement. International Data Corporation (IDC) also noted a sharp decline in second quarter smartphone shipments, estimating a 6.7% decline on the back of the memory crisis. Various research firms use different models to estimate shipments.

The sharp declines are especially damaging for the entry-level and mid-range segments, which are far more price-sensitive than the premium smartphone market. "Memory costs are up nearly 300% from a year ago, and now account for over 65% of [bill of materials] at the low end, making survival increasingly difficult for OEMs with low-end portfolios," IDC senior research director for Worldwide Consumer Devices, Nabila Popal, wrote in a research note. "Q2 confirms exactly what we predicted: this is not a uniform downturn; memory crisis is favoring premium players and punishing vendors exposed to the low end."

Research firm Omdia pointed to a less drastic drop in shipments, but like Counterpoint Research and IDC, said the memory shortage has created "severe market polarization." All three research groups said that Apple (AAPL) and Samsung (005930.KS) shipments increased in Q2, while Chinese firms like Xiaomi, Oppo, and Vivo bore the brunt of the downturn. Despite near-term growth, however, some analysts see potential headwinds for premium brands, especially Apple.

On Monday, KeyBanc Capital Markets' Brandon Nispel released an investor note downgrading Apple stock to Underweight on concerns that potential price increases on future iPhones, coupled with a reduction in wireless carrier promotions and subsidies, could force consumers to hold on to their existing devices longer. That, he writes, could ultimately lead to slowing growth in Apple's Services segment. "We see Apple's Services revenue growing 13.5% in FY27... but slowing to 7% in FY27," he wrote.

Estimates indicate the memory crisis could last into next year or further, with some experts saying it could take until 2030 for the AI-induced bottleneck to clear. Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X at @DanielHowley.