China’s smartphone market just recorded its sharpest contraction in years. Sales plunged 13 percent year-over-year during the 618 shopping festival. The culprit? Surging prices for memory chips that left manufacturers with little choice but to raise prices or shrink discounts. Even Apple’s aggressive promotions couldn’t fully offset the pressure.
Counterpoint Research delivered the sobering data. Huawei alone posted growth. Its sales climbed 19 percent. The company seized a 21 percent market share. Apple slipped to second place but still outperformed the broader market. iPhone sales fell 9 percent. That decline looked mild next to Xiaomi’s 24 percent drop, Honor’s 33 percent plunge and OPPO’s 12 percent slide.
But the story runs deeper than one festival. Memory costs have climbed relentlessly since late 2025. AI infrastructure projects devoured available DRAM and NAND supply. Prices for mobile LPDDR chips nearly tripled in some quarters. Handset makers watched their bill of materials swell. Many responded by trimming storage options on entry-level models. Others passed costs directly to buyers.
AppleInsider laid out the mechanics. Apple started its 618 campaign a full month early. It dangled up to 2,000 yuan in discounts and trade-ins on iPhone 17 Pro models. Those moves helped the company climb the rankings. Yet the promotions proved less generous than the year before. Steeper cuts on the prior iPhone 16 series had set a high bar.
Consumers noticed. Some pulled purchases forward to beat expected price hikes later in the year. Others simply walked away. The post-graduation buying wave in June offered only temporary relief. After that, seasonal slowdowns returned. Vendors have already signaled conservative shipment plans for the second half. China’s full-year smartphone market now heads toward double-digit declines.
Analysts saw this coming months ago. In March, Reuters reported Apple’s early 2026 surge. The company posted 23 percent growth in the first nine weeks. Subsidies on the base iPhone 17 helped. So did its tighter supply chain control. While Chinese Android brands raised list prices, Apple held steady and absorbed some margin hit. “Apple is unlikely to follow suit, instead absorbing part of the margin pressure and using the situation to potentially expand its market share,” Counterpoint analysts wrote at the time.
That strategy delivered mixed results by midsummer. Apple’s smaller year-over-year decline during 618 still reflected a tough environment. Huawei’s Mate 80 and Enjoy 90 Pro Max stood out. Battery life and aggressive pricing fueled demand. The Enjoy 90 Pro Max became the company’s top seller during the event. Other Android models from OPPO, vivo and Xiaomi cracked the top 10 bestsellers but couldn’t escape sales drops.
Global forces amplified the pain. A severe memory shortage, worsened by geopolitical tensions, pushed the worldwide smartphone market toward its worst annual decline on record. Reuters warned in early June that shipments could fall nearly 14 percent in 2026. Low-end devices took the hardest blows. Buyers delayed upgrades or turned to refurbished units. Premium segments proved more resilient. Apple and Samsung held advantages through secured supply and stronger margins.
Memory prices show no quick relief. Gartner projected a 130 percent surge in combined DRAM and SSD costs by the end of 2026. That would lift average smartphone prices 13 percent. Entry-level buyers would exit the market five times faster than premium ones. Counterpoint’s own forecasts painted a similar picture. Mobile LPDDR prices in the second quarter of 2026 tracked toward triple the levels seen in late 2025.
Apple has explored workarounds. The company lobbied for flexibility to source from Chinese memory suppliers. Reports surfaced in late June that Apple weighed deals with blacklisted firms to contain costs. CNBC detailed those efforts. Executives described the component crunch as one of the worst in the firm’s history. A rumored tie-up with CXMT, a Chinese fab, could threaten Micron’s dominant position in mobile memory. Yet such moves risk regulatory backlash in Washington.
Industry watchers debate the long-term shape of the market. Higher average selling prices may lift revenue even as unit volumes fall. Brands have culled low-margin SKUs. They focused portfolios on midrange and premium devices where margins offer more breathing room. Yet that shift leaves gaps at the bottom end. Budget-conscious Chinese consumers face fewer affordable options. Some opt to keep older phones longer.
Huawei’s resilience stands apart. The company’s vertical integration and domestic supply ties provided buffers. Its growth during 618 came despite the same memory headwinds hammering rivals. Xiaomi, once a volume leader, suffered steeper losses. Honor’s 33 percent decline highlighted vulnerabilities in the value segment.
Supply chain partners echoed the caution. They flagged continued price pressure through year-end. Some manufacturers accelerated purchases during 618 to lock in inventory before further increases. That front-loading may distort later quarters. It also signals caution about demand recovery.
Apple’s position offers a study in contrasts. Its early-year gains in China bucked the trend. The iPhone 17 series drew upgrades. Strong e-commerce promotions and subsidy eligibility played roles. Yet the memory crisis forced even Apple to trim some incentives. Its 9 percent sales drop during 618 beat the market average but still marked contraction.
Broader forecasts remain grim. IDC projected global shipments down 12.9 percent for the year. Gartner foresaw an 8.4 percent smartphone decline. Both pointed to memory as the dominant factor. AI demand from data centers redirected wafer capacity away from consumer electronics. Recovery hinges on new fabrication capacity coming online. That process takes time. And prices could stay elevated well into 2027.
So the squeeze continues. Chinese buyers confront higher prices across brands. Manufacturers juggle cost absorption against margin protection. Apple bets on its premium appeal and supply discipline. Huawei leans on domestic strength. The rest scramble to adapt. This memory crunch won’t fade quickly. Its effects will echo through product lineups, pricing strategies and market shares for quarters to come.
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