Citi Slashes 2026 Smartphone Forecast by 17%
Citi Research significantly lowered its global smartphone shipment forecast for 2026, projecting a 17% year-over-year decline to 1.04 billion units. The downgrade reflects a combination of severe memory component shortages, subsequent price hikes, and weakening consumer demand caused by rising inflation. The bank anticipates a partial recovery in 2027 with a 12% annual increase to 1.17 billion units. This challenging environment is also expected to drive up the average selling price of smartphones by 7% in 2026, further straining consumer wallets.
AI Boom Fuels 171% DRAM Price Surge
The primary driver behind the component squeeze is the explosive demand for memory chips from the artificial intelligence sector. This AI boom is creating a global memory shortage, with Citi’s global memory analyst, Peter Lee, now forecasting DRAM average selling prices to surge 171% year-over-year in 2026. This price inflation directly impacts smartphone manufacturers, as memory components account for a significant portion of a device's cost, such as 9% of an iPhone's bill of materials. Intense demand from data centers is diverting supply from consumer electronics, creating a significant headwind for the entire smartphone industry.
Component Suppliers Face Diverging Fortunes
In response to this market shift, Citi is adopting a selective investment strategy. The bank remains constructive on memory chip producers who are direct beneficiaries of the price hikes, including SK Hynix, Samsung Electronics, and Kioxia. These companies are well-positioned to capitalize on the AI-driven demand cycle. Conversely, the outlook is more challenging for companies heavily reliant on smartphone shipment volumes. The forecast downgrade casts a shadow over iPhone-cycle suppliers like LUXSHARE PRECISION and camera module makers such as COWELL, as the industry braces for a period of lower volumes and margin pressure.
