Smartphone manufacturers are facing a shift in consumer behavior as rising memory chip costs drive price hikes for new models that offer only marginal technical improvements. According to Counterpoint Research, the global smartphone market experienced an 11 percent year-on-year decline in shipments during the second quarter, marking the steepest such drop since 2013, as buyers increasingly favor older, more affordable flagship devices.
Rising Costs and the “Flagship Fatigue” Effect
Consumers are increasingly hesitant to pay premiums for new smartphones that lack significant innovation. Market data indicates that upcoming releases, including potential iterations of the Samsung Galaxy Z Fold and Apple’s Pro-tier iPhone models, may see price increases of up to $300. These hikes are largely driven by the soaring cost of memory components. According to Counterpoint Research analyst Shilpi Jain, the global memory crisis has become the primary drag on the industry, making it structurally difficult to maintain historical price points for mid-tier and entry-level devices.
For instance, reports suggest the upcoming Galaxy Z Fold 8 Ultra may feature a display crease nearly identical to its predecessor, the Fold 7, despite an expected price jump of roughly $280 for the 1TB model. Apple has similarly signaled that price increases are “unavoidable,” according to CEO Tim Cook, while delaying the release of base-model iPhones to prioritize higher-margin Pro variants.
Did you know?
Rising component costs have forced manufacturers to rethink their production strategies. In a notable shift, Samsung recently requested suppliers to increase production of the Galaxy S26 series by 50 percent, reaching 1.5 million units, to meet sustained consumer demand for established, lower-cost flagships.
Market Share Dynamics: Samsung vs. Apple
The competition between the two industry leaders remains volatile, with market leadership fluctuating based on the timing of new releases and the performance of older models. In the second quarter of this year, Samsung captured 24 percent of the global market share, a 4 percentage point increase from the previous year, according to Counterpoint Research. This surge helped Samsung reclaim the top global spot from Apple, which held 20 percent of the market during that same period.
Apple’s performance remains heavily reliant on the longevity of the iPhone 17 series. Despite the arrival of newer cycles, the iPhone 17 has maintained its status as the most-shipped global model. This sustained interest has created a “mix effect” that bolsters the supply chain. For example, LG Innotek, a primary camera module supplier for Apple, is projected to see a 1,599 percent year-on-year surge in second-quarter operating profit, as noted by Daishin Securities analyst Park Kang-ho. The strong demand for the iPhone 17’s camera upgrades has allowed the company to maximize production efficiency.
Future Outlook for Smartphone Upgrades
The traditional model of driving growth through annual, high-priced hardware updates is under scrutiny. As component shortages persist, the industry is seeing a decoupling of “new” and “popular” devices. If consumer disappointment with minor hardware upgrades continues, the trend of buying last-generation flagships may become a permanent fixture rather than a temporary anomaly.
Pro Tip:
When choosing a new device, compare the “Bill of Materials” value—the total manufacturing cost of a device—against the retail price. Often, the previous generation of a flagship phone offers a lower price point, especially as manufacturers struggle to justify the cost of minor design changes.
Frequently Asked Questions
Why are smartphone prices increasing?
Prices are rising primarily due to the global memory chip crisis. According to Counterpoint Research, this component shortage has increased the total manufacturing cost, or “Bill of Materials,” making it difficult for companies to maintain previous price points.
Are new smartphones worth the upgrade this year?
Many consumers are opting for older flagships. Reports indicate that upcoming models may feature only minor “spec-bumps” while carrying price increases of up to $300, leading many users to prefer proven, lower-cost models like the iPhone 17 or Galaxy S26.
How is the component shortage affecting production?
The shortage is causing a shift in production focus. Samsung, for instance, has increased production targets for the Galaxy S26 to meet steady demand, as newer, more expensive models face potential consumer resistance.
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