The global smartphone market is heading for its steepest annual contraction on record, with shipments projected to slump by 13.9% this year to 1.08 billion units, Counterpoint Research said on Monday, citing a worsening shortage of memory chips. The forecast is a downgrade from the 12.4% decline projected in February, with the squeeze in global chip supply exacerbated by the Iran war. IMPACT MOST ACUTE AT BUDGET END OF MARKET The impact is being felt most acutely in lower-end smartphones as chipmakers shift production capacity to AI-related chips, making entry-level devices less economical to produce. Global smartphone wholesale prices rose 14% in the first quarter while shipments fell 3.1% year on year. That trend is expected to continue as inventory built before the supply shock becomes depleted, with some models priced below $150 likely to disappear from the market. "Smartphone makers in the low and mid-tier are caught between cost increases they cannot absorb and consumers with limited spending power," said Wang Yang, a principal analyst at Counterpoint, an independent research company that publishes quarterly smartphone shipment data. "The question is no longer how to grow shipments or market share, but whether to remain in the market at all."