India’s smartphone market contracted in the first quarter of calendar year 2026, as rising component costs, particularly memory, and weakening demand began to impact shipments and pricing across segments. According to Counterpoint, shipments declined 3 per cent year-on-year in Q1 CY2026, marking the weakest quarter for the market in the past six years.
The slowdown comes despite increased launch activity, with brands advancing nearly one-third of their model launches to the quarter in an attempt to offset rising bill of materials (BOM) costs driven by memory prices and currency fluctuations.
Dip in the Indian smartphone market
India’s smartphone shipments declined 3 per cent year-on-year in Q1 CY2026, marking their weakest quarter in the last six years, according to Counterpoint Research’s Monthly India Smartphone Tracker. This comes on the back of a mixed performance over the previous two quarters.
In the last quarter of CY2025, India’s smartphone shipments declined 4 per cent on year-on-year basis. Counterpoint research stated that this was mainly due to a seasonal post-festive demand slowdown, which was further aggravated by price hikes linked to rising memory costs.
In contrast, the market had grown 5 per cent year-on-year by volume and 18 per cent year-on-year by value in Q3 CY2025, marking its highest-ever quarterly value, likely driven by strong festive demand and sustained traction in the premium segment.
Despite the Q1 CY2026 decline, brand-level performance remained active.
Vivo (excluding iQOO) led the market with a 21 per cent share. Samsung secured the second position, likely driven by demand for its A-series models and traction for the Galaxy S26 series.
OPPO retained the third position with a 14 per cent share and recorded 8 per cent year-on-year growth, making it the fastest-growing brand among the top five. Xiaomi (including POCO) ranked fourth, with strong performance in the Rs 10,000–Rs 20,000 segment.
Realme also saw strong traction in the Rs 10,000–Rs 20,000 segment, particularly in online channels, ranking among the top two brands in that category.
Apple’s shipment share reached 9 per cent in Q1 2026, supported by sustained demand for the iPhone 17 series and financing offers such as long-term EMIs and exchange deals.
Among other brands, Nothing (including CMF) emerged as the fastest-growing overall, growing 47 per cent year-on-year, while Google recorded 39 per cent growth in the premium segment (above Rs 45,000).
Possible reasons for the dip
The decline in shipments is driven by rising costs and weakening consumer demand, with memory inflation emerging as the central issue.
“The market is facing a clear affordability squeeze, driven by sharp memory-led cost inflation and currency pressures that have forced OEMs to raise prices across key models,” said Counterpoint Senior Analyst Prachir Singh.
He added that “with average hikes exceeding Rs 1,500, the sub-Rs 15,000 segment has been hit the hardest, given its high price sensitivity.”
Beyond component costs, macroeconomic factors are also playing a role. Singh noted that “rising energy costs amid ongoing geopolitical tensions in the Middle East are further straining household budgets, pushing consumers to prioritise essentials over discretionary purchases like smartphones.”
This combination of higher prices and reduced spending power is extending upgrade cycles, particularly in the mass segment, delaying recovery.
Why is there a memory shortage?
At the centre of these cost pressures is a prolonged global shortage of memory chips, particularly DRAM and NAND, which are critical components in smartphones.
According to a Nikkei Asia report, supply constraints are expected to persist as major manufacturers such as Samsung Electronics, SK Hynix and Micron struggle to scale production fast enough. These three companies together account for around 90 per cent of the global DRAM market.
The report noted that “a shortage of memory chips appears likely to continue until around 2027,” with production increases expected to meet only about 60 per cent of demand.
One of the key reasons is a shift in industry priorities. Memory manufacturers are increasingly focusing on high-bandwidth memory (HBM), which is used in AI infrastructure and offers higher margins. This has diverted capacity away from general-purpose memory used in smartphones and PCs.
While Samsung is preparing to bring additional fabrication capacity online at its Pyeongtaek facility, full-scale mass production is not expected until 2027 or later. Similarly, SK Hynix has begun ramping up production at new facilities, while Micron is planning expansions in the US and Asia — but most of these will only contribute meaningfully from 2027 onwards.
Even where new fabs are being built, scaling production takes time due to yield challenges and technical complexity. As a result, supply remains constrained in the near term.
This imbalance has led to sharp price increases. Memory prices for early 2026 are estimated to be “up roughly 90 per cent on the quarter,” with memory now accounting for up to 20 per cent of the cost of low-end smartphones — a figure that could rise to nearly 40 per cent by mid-2026.
When can the market recover?
The outlook suggests that the pressure on smartphone shipments is likely to continue in the near term.
“India’s smartphone market is expected to remain under pressure in the near term, with Q2 2026 likely to see a double-digit decline,” said Counterpoint Research Director Tarun Pathak.
For the full year, the market is projected to decline by around 10 per cent year-on-year, as sustained component cost inflation — particularly in memory, which has already increased fourfold over the past three quarters — continues to impact affordability.
A broader recovery will depend on easing memory supply constraints. However, industry estimates suggest that supply-demand balance may not normalise until 2028, as new production capacity comes online gradually and AI-driven demand continues to absorb a significant portion of output.
Until then, brands are expected to focus on premium segments, tighter portfolio strategies and channel efficiency, while the mass market continues to see slower and uneven recovery.
