Smaller device makers redesign products as memory shortage deepens

A global memory chip shortage driven by surging AI demand is dragging smartphone shipments toward their steepest annual decline on record, forcing smaller device makers to redesign products and test incoming chips for counterfeits as they brace for a crisis that industry leaders say will only deepen through 2027.

The Shipment Freefall

Global smartphone shipments fell 11% year-over-year in the second quarter of 2026, reaching the lowest second-quarter level since 2013, according to Counterpoint Research. The firm's latest full-year forecast projects shipments will drop roughly 14% this year, while market research firm Omdia expects a 12% decline to 1.097 billion units. IDC has offered an even grimmer outlook, forecasting a 16.7% drop as the memory crisis hits hardest in the second half of the year.phonearena+3

The root cause is straightforward: Samsung, SK Hynix ↗ 2.46%, and Micron ↗ 3.92% — which together control over 95% of global DRAM production — are diverting manufacturing capacity from conventional smartphone memory toward higher-margin High Bandwidth Memory chips used in AI accelerators. The result is a supply squeeze that has sent DRAM contract prices sharply higher, with TrendForce estimating a 13–18% quarterly increase in the current period.moneycontrol+2

Budget Devices Bear the Brunt

The shortage falls hardest on lower-cost phones and laptops. Memory can account for nearly 60% of the bill of materials on handsets priced around $400, according to Fairphone CEO Raymond van Eck. Nothing co-founder Carl Pei has warned that brands may need to raise prices by 30% or more, or downgrade specifications, as memory becomes one of the largest cost drivers. Omdia data shows the share of smartphones shipped below $200 is expected to fall from 40.6% in 2025 to 25.6% by next year.freepressjournal+2

Smaller manufacturers are adapting in real time. Finnish handset maker Jolla has designed two motherboard variants so it can swap combined memory packages for discrete chips and stress-tests every incoming batch for refurbished parts being resold as new, according to Reuters. U.S. laptop maker Framework made memory modular from the start, letting customers fit salvaged components from older machines.moneycontrol+1

No Relief in Sight

SK Hynix CEO Kwak Noh-jung said in July that 2027 would be "the worst year in the industry's history from the supply perspective," with demand outstripping capacity beyond 2030. Dell Technologies ↘ 3.46% CEO Michael Dell echoed that warning this week, telling investors the structural shortage is likely to worsen by 2027 as AI model development cycles far outpace the timelines required to build new chip fabrication plants.news.futunn+1

"Customers typically go through the five stages of grief," Dell said. "At first, they'll say, 'Okay, prices have gone up — I'm not really okay with that.' But then something even worse comes along: the product simply isn't available".news.futunn