Fewer phones, higher prices: the smartphone market is shrinking in 2026
The smartphone market is on track for its sharpest annual decline in years: research firm Omdia forecasts global shipments will fall 12% in 2026 to just over 1 billion units. Fewer handsets are being sold, yet the industry's total revenue is still growing — because the phones that do sell cost significantly more. If you're in the market for a new phone, that dynamic affects you directly.
The budget tier is disappearing
The clearest shift is at the cheap end. Phones priced under $200 made up 40.6% of all shipments in 2025; Omdia's June 2026 forecast projects that share collapsing to 25.6% by 2027. The average selling price has jumped roughly 21% year-on-year to around $565 — a record high driven largely by surging component costs, particularly memory chips.
Sub-$100 Android handsets have essentially vanished from US and UK shelves, down around 60% year-on-year in early 2026. That removes the entry point that once made smartphones accessible for millions of first-time or budget-conscious buyers.
Budget smartphones are rapidly losing shelf space as component costs drive prices up across all tiers.
Premium is the new normal
At the other end, phones costing $800 or more are gaining ground fast — rising from 21.1% of shipments in 2025 to a projected 28.4% in 2027. Apple and Samsung are the primary beneficiaries; IDC's June 2026 forecast notes that North America sits at roughly 60% premium-segment dominance, insulating those markets from the worst of the volume decline compared to emerging markets seeing drops of 19–23%.
There's a logic to paying more, too. Samsung, Google, and Apple now offer up to seven years of software support on flagship devices. A £1,000 phone kept for five or six years starts to look cheaper per year than replacing a £300 budget phone every two. That calculation is clearly influencing buyers — and giving manufacturers cover to keep raising prices.
What this means for your next upgrade
Manufacturers are passing component cost increases on to consumers across every price tier, and that trend isn't expected to reverse soon. Memory costs remain elevated, and several brands have signalled further retail price rises for late 2026 models.
The practical upshot: if you're holding onto a phone that still works, you're making a financially sound decision. If you do need to upgrade, the mid-range is narrowing — the real choice increasingly comes down to a well-supported premium device on a financing plan, or a secondhand flagship from a year or two ago.