The international smartphone market is bracing for a potential 31% slump in shipments over the coming year, a consequence of escalating memory chip costs fueled by the demand from AI hyperscalers, according to Jeffries.

The firm noted a 70% quarter-on-quarter price surge in memory chips, driven by server-making companies’ increasing demand. The prices are projected to rise by an additional 50% in Q2 2026, Fortune reported on Wednesday.

Edison Lee, the China Head of Tech & Apple at Jefferies, shared this information with his team. Meanwhile, a note by Jefferies SVP Sonali Salgaonkar and her team revealed, “Post AI demand surge, servers are now 60-70% of offtake of memory chips vs. 30% earlier.”

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Earlier this year, analysts had already predicted the steepest decline in the global smartphone market in 2026, with memory shortages driving up device prices. The global PC and smartphone markets were expected to shrink by 11% and 13%, respectively, according to a February report from the International Data Corporation.

Meanwhile, Counterpoint Research in the same month projected a 12% year-on-year decline in global smartphone shipments in 2026, calling it the "sharpest decline on record."

As memory costs continue to soar due to the strong demand for AI-driven technologies, smartphone production costs are increasing. Memory prices, which rose 40%-50% in late 2025, are projected to climb further in early 2026, potentially increasing premium device costs by over $150, as per the latest Counterpoint Research data.

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Qualcomm is expected to face near-term headwinds due to market share loss at key smartphone customer accounts, as noted by analyst James Schneider. He said soaring memory prices could reduce smartphone demand, impacting the company’s biggest business segment.

Meanwhile, a January report suggested that Apple Inc. is prioritizing production and shipment of its premium iPhone models for 2026, delaying the standard version due to supply chain constraints. The strategy aims to optimize resources, offset rising memory chip costs, and manage manufacturing challenges linked to its upcoming foldable iPhone.

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This article AI's Chip Appetite Is Squeezing The Global Smartphone Market— Analysts Warn Of 31% Shipment Slump Ahead originally appeared on Benzinga.com