Rising demand for computing power from generative AI and the semiconductor industry's move toward high-performance computing are reshaping the smartphone supply chain, with global implications for device availability, pricing, and component sourcing as memory prices rise, capacity shifts toward AI workloads, and smartphone production forecasts point to substantial declines ahead.
Industry sources say surging DRAM and NAND prices and capacity prioritization for AI applications are creating a crowding-out effect that is suppressing end-user demand for consumer electronics and prompting order revisions. Multiple market research firms forecast that sustained memory price increases could push global smartphone production in 2026 down by about 10-13% compared to 2025, to between 1.1 billion and 1.135 billion units, with deeper contractions possible if conditions worsen.
Analysts expect annual shipment declines of double digits worldwide, with Android devices facing sharper drops of roughly 15%, making that segment a principal pressure point in the current market correction.
Supply chain participants attribute the weakness primarily to changes in the cost structure: higher memory costs force smartphone brands to adjust pricing and specifications, which in turn dampens consumer demand and reduces component procurement momentum for system-on-chips, image sensors, and power integrated circuits. Indicators such as reduced wafer starts at 4nm process nodes and lower chip shipments suggest inventory corrections are already underway.
Foxconn has been relatively insulated from the downturn, observers note, because its core business remains concentrated on Apple's iPhone series, which targets the mid-to-high-end market and is structurally distinct from areas experiencing weaker demand. The upcoming iPhone 17 series in 2025 has reportedly performed better than expected, and Apple is said to plan further mechanical and functional design innovations in future models to stimulate replacement demand in the high end.
Foxconn's fourth quarter 2025 financial report indicated a structural shift: cloud network products centered on AI servers overtook consumer smart products led by the iPhone in revenue contribution for the first time, with the AI cabinet business now the primary growth driver. Industry sources say corrections in consumer electronics will mainly affect Foxconn's Android and non-Apple lines in the near term, while the company's expanding cloud-networking business should help cushion the overall impact, though the net balance will require continued monitoring.
Article translated by Jingyue Hsiao and edited by Jack Wu
