China’s Smartphone Shipments Extend Decline As Higher AI-Driven Chip Costs Lift Prices: Huawei And...

China's smartphone market contracted for a fifth consecutive quarter in the second quarter of 2026 as rising memory chip prices, fueled by the global artificial intelligence boom, pushed handset prices higher and dampened consumer demand.

The slowdown underlines that soaring AI infrastructure investment is reshaping the consumer electronics industry, with component inflation weighing on smartphone sales even as demand for AI servers and data center hardware remains robust.

According to research firm IDC, smartphone shipments in China fell 4.3% year-on-year to 66 million units during the April-June quarter. First-half shipments were down 4.2% from the same period a year earlier, highlighting persistent weakness in the world's largest smartphone market despite improving conditions in other parts of the global technology sector.

The decline points to growing pressure on manufacturers as memory chip prices continue to surge. AI-related demand has tightened supplies of DRAM and NAND flash memory, prompting many Android smartphone makers to raise retail prices or scale back lower-cost models to protect margins. Those price increases discouraged many consumers from upgrading their devices at a time when household spending remains subdued, and China's economic recovery continues to face headwinds.

The smartphone market is increasingly becoming an indirect casualty of the AI investment cycle. Chipmakers such as Samsung Electronics and SK Hynix have prioritized supplying high-margin memory products for AI servers, where demand from cloud providers continues to outpace supply. That has driven memory prices sharply higher, raising production costs for smartphones, personal computers, and other consumer electronics.

Against that backdrop, Huawei Technologies and Apple emerged as the only major smartphone vendors to post shipment growth during the quarter.

Huawei retained its leadership position with a 22.6% market share after shipments increased 19.4% from a year earlier. Apple ranked second with an 18.1% market share, recording the strongest growth among leading vendors as shipments rose 24.4%.

IDC attributed much of their success to pricing discipline.

"Huawei and Apple held their prices steady while competitors were raising theirs, and that gave hesitant buyers a reason to go ahead and purchase in a quarter when most of the market was giving them a reason to wait," said Arthur Guo, a senior analyst at IDC China.

In contrast, China's major Android vendors experienced broad-based declines. Xiaomi, which ranked fifth in the market, suffered the steepest fall among the leading brands, with shipments dropping 21.7% year-on-year. Oppo's shipments declined 9.7%, while Vivo recorded an 11.4% decrease.

IDC said most Android manufacturers responded to surging memory and component costs by increasing handset prices or reducing their budget offerings, making consumers more reluctant to replace older devices. The research firm also noted that the fading impact of government subsidy programs removed an important source of support that had boosted smartphone purchases in previous quarters.

The shipment data also show that explosive spending on AI infrastructure has redirected chip production toward high-performance computing applications, creating supply constraints across the memory market. Memory manufacturers have repeatedly warned that capacity expansion is struggling to keep pace with demand from hyperscale cloud providers and AI developers, while prices for memory chips have climbed sharply over the past year.

That dynamic is creating winners and losers across the technology ecosystem. Memory suppliers continue to benefit from strong pricing power, but smartphone manufacturers face rising input costs and weaker consumer demand. Companies with stronger pricing power or premium brand recognition, such as Huawei and Apple, have been better positioned to absorb higher component costs without passing them on to customers.

The latest figures are boosting concerns that China's consumer recovery remains uneven. While exports tied to AI hardware and semiconductors have strengthened industrial production, domestic consumption has remained subdued amid ongoing weakness in the property sector and cautious household spending.

The decline in smartphone shipments suggests consumers remain reluctant to spend on discretionary electronics unless offered compelling pricing or product differentiation. With AI-related investment expected to remain elevated for years, analysts expect pressure on memory supplies to persist, meaning smartphone makers may continue facing higher production costs.