Smartphone shipments in China decline for the fifth consecutive quarter due to the impact of memory costs.

      For the fifth consecutive quarter, the number of phones shipped from Chinese warehouses decreased compared to the previous year. According to IDC's figures released on Tuesday, shipments dropped by 4.3% to 66 million units in the second quarter as manufacturers increased prices to offset rising costs of memory and other components. Shipments during the first half of the year slid 4.2% compared to the same timeframe last year. Such a prolonged downturn begins to reflect the market's overall condition rather than merely indicating a temporary lull. However, only two manufacturers saw growth: Huawei's shipments rose by 19.4% compared to last year, while Apple's increased by 24.4%, capturing 22.6% and 18.1% of the market respectively. Conversely, all other brands experienced declines. Xiaomi, in fifth place, faced a shipment drop of 21.7%, while Oppo and Vivo saw reductions of 9.7% and 11.4%, respectively. The distinction between the successful brands and the rest was not based on new product cycles but rather their pricing strategies.

      According to Arthur Guo, a senior analyst at IDC China, "Huawei and Apple maintained their prices while competitors raised theirs, which encouraged hesitant buyers to make purchases during a quarter when the majority of the market was prompting them to hesitate.” The rationale behind competitors' price increases lies far beyond the production line. DRAM prices have surged as a few companies that dominate memory production shift wafer capacity toward the high-bandwidth components required by AI accelerators, resulting in the phone industry competing for limited supply. Budget smartphones are the first to be affected, as they have the smallest margins to absorb a cost doubling. Consequently, there is an increasing impact from the AI boom on entry-level phones, affecting their bill of materials incrementally.

      Most Android manufacturers reacted by raising prices or scaling back their budget offerings, as IDC noted, which is a practical strategy to encourage price-sensitive customers to retain their current devices. The waning influence of government subsidies has also diminished another support system that previously bolstered demand.

      This situation is not exclusive to China. IDC now predicts that global smartphone shipments will decline by 13.9% in 2026, reaching 1.09 billion units, marking the most significant annual downturn recorded in the industry, with China alone expected to drop by around 13%. This trend was already indicated in the first quarter, where shipments in China fell by 3.3% from January to March, with Huawei and Apple again sustaining the market, and rival tracker Omdia noted a 1% decline during the same period due to rising costs pushing device prices higher.

      The updated global forecast reflects a downgrade. In February, IDC had anticipated a 12.9% decline, with the additional contraction primarily attributed to low-end Android vendors grappling with the new cost landscape. Meanwhile, Apple’s strong performance in China is not unprecedented; its shipments increased by approximately 20% in the first quarter according to Counterpoint, the fastest growth among major vendors, and the second quarter continued this upward trend.

      Xiaomi's 21.7% decline is the most significant among major competitors, coming at a time when its investor narrative has been more focused on its electric vehicle deliveries rather than smartphone sales. Oppo and Vivo, both significantly exposed to the mid-range market, experienced lesser declines but faced similar challenges.

      None of the top five brands have specifically attributed their struggles to memory prices, and they have generally remained tight-lipped regarding their pricing strategies. However, the shipment data strongly suggests that the two companies that did not adjust their prices—Huawei and Apple—were the only ones to increase their phone sales.

      Any future relief is expected to come from semiconductor manufacturers rather than from marketing strategies. Memory producers are actively working to increase capacity, and discussions have been ongoing in Seoul with Samsung and SK Hynix about establishing a second domestic chip cluster; nevertheless, most estimates suggest that meaningful new supply won’t materialize until late 2027.

      In the meantime, the Chinese market serves as a proving ground for which companies can maintain their prices; Huawei and Apple managed to do so for a single quarter. The third-quarter results, expected in the autumn alongside the upcoming iPhone cycle, will determine if this approach was a mere occurrence or a deliberate strategy.