Cheap smartphones are dead. Apple doesn’t care

29/08 18:15 - Cheap smartphones are dead. Apple doesn’t care
An important but potentially fragile trend is emerging in the data being reported by smartphone industry trackers: while painful component price increases are denting overall phone sales, the iPhone’s market share continues to increase.  This likely reflects two key truths: Apple has fought to keep iPhone prices as stable as possible; though it has raised the price for its other products, it has not yet done so for its all-important smartphone. The company has built a great reputation for making smartphones that keep going for years and hold value better than rival platforms, though the looming price increase could put that perception to the test. As prices rise, quality matters more To most people, iPhones offer a perceived value. So, when the chips are down, consumers still gravitate toward them. They recognize the quality of these devices and, as the cost of other smartphones continues to increase, see iPhones as a more valuable alternative.  Not only that, of course, but with the latest ‘e’ series iPhones, Apple is punching its way into the mid-range/value smartphone market, even as incumbents are forced to raise prices because of the AI-driven memory cost inflation.  Smaller vendors are also being forced to raise prices or quit markets, with many reducing the number of devices they offer or leaving specific markets entirely. They are far more affected by memory price inflation than Apple, because they don’t order components at the same scale.  “The 2026 decline reflects more than temporarily weak demand,” said Counterpoint analyst Yang Wang. “Higher component costs are pushing manufacturers to remove products and configurations that are no longer economically viable, particularly at lower price points.” This is a global trend IDC tells us to expect a record 16.7% decline in smartphone shipments in 2026 because of the memory crisis, which is pushing smartphone ASPs up 27.6% this year to around $581. (The researchers also expect Apple to inject some growth into this market when it introduces its folding iPhone). They point out also that while total shipments are falling, the value of the market is increasing — because prices are climbing. And they note that while low-end Android devices are disappearing, the premium end of the smartphone market (itself dominated by Apple and Samsung) remains more resilient. “The era of the cheap smartphone has ended,” said Francisco Jeronimo, IDC vice president for worldwide client devices. “From here, the winners will be the vendors with the scale and supply leverage to hold demand at prices consumers have never had to pay before.” The picture is much starker on a platform basis, as Android devices account for almost the entire market decline; its share fell seven percentage points in a single year. Meanwhile, iOS share grew almost four percentage points to a record-high 23.6%. The pattern is being repeated globally — nation by nation and no matter which analyst you choose to track. Counterpoint expects Apple to gain relative share, even as the market declines. That’s true in most regions; the same analyst reports that while the MEA smartphone market fell 10%, the iPhone gained 28% share. It’s the same in Europe, where shipments slipped 10% in Q2, with only Apple gaining share, from 25% to 34% of the region’s smartphone market. In India, while phone shipments fell 11.2%, the iPhone is up 8.5%.  Globally, the iPhone 17 was the world’s biggest-selling smartphone in Q2 2026. That means the top 10 devices are now completely dominated by Apple and Samsung. The one caveat within all this is price. Apple hasn’t yet raised iPhone prices, but is widely expected to increase them by $100 in a few weeks. When it does, the inherent value of the platform should continue to be a strong advantage for the company, which is also scooping up converts in the second-user market. And, of course, the introduction of Apple Upgrade gives customers a route for affordable investment in new Apple kit. What next? Foldables appear to be the next big hope for smartphones. These expensive devices lean into the only part of the market expected to remain resilient — affluent consumers who can maintain good living standards. That’s the 25% of Americans who are interested in Apple’s new folding phone, according to Cnet. These consumers are already primed, locked, loaded and ready to buy the product, if it meets the hype. It probably will do so, prompting IDC to predict more than 10 million sales in the first year, despite the likely $2k+ price tag and much-reported limited availability. “A very elite set of consumers are being targeted here, who will be lining up to buy the device,” said IDC. Siri Ai holds the key The wild card is Siri and AI. Apple is digging in with Siri AI and is expected to introduce AI in partnership with Alibaba in its second biggest smartphone market, China, potentially alongside the new iPhones. There’s a lot riding on this, and initial reviews of what it has accomplished in Siri AI have been very positive. Apple can be confident that it now offers the very best private, potentially on-device consumer AI play, backed up with an end-to-end computing system that supports sovereign and on-prem AI services in the form of its fantastic Macs. What does that mean? Rothschild & Co Redburn recently upgraded Apple to “buy” with a $400 target, speculating the company could become, “the gatekeeper of consumer AI, delegating AI workloads to a subservient fleet of open-source models.”  Creative Strategies analyst Carolina Milanesi puts Apple’s AI strategy into few words: “Apple wants to own as much of the AI workflow as it can hold,” she said. Apple’s relative smartphone market share combined with its fast-growing Mac market share means it has a compelling offer as it seeks to stake its claim in that space. What’s open to question is whether iPhone users will be comfortable using AI more frequently on their device, while Apple’s challenge is ensuring the privacy it promises is a commitment it can keep.  You can follow me on social media! Join me on BlueSky, LinkedIn, Mastodon and subscribe to my excellent, hand-curated daily Apple news headline summary at The Core. ...