2026 Global Smartphone AP Market Outlook: Product Layout and Pricing Stakes Amidst Supply Chain Headwinds

I. 2026 General Market Outlook: Caught Between Memory and Substrate Shortages

Latest supply chain surveys from Isaiah Research indicate that the global smartphone Application Processor (AP) market is facing severe supply chain headwinds in 2026. We have revised our full-year AP shipment forecast downward to a range of 1,220 million to 1,230 million units, representing an estimated year-over-year (YoY) decline of approximately 2.5%.

This downward revision is primarily driven by two critical supply chain bottlenecks:

• The Domino Effect of Memory Price Hikes and Shortages: Rising prices and tight supply for DRAM and NAND Flash are severely compressing the Bill of Materials (BOM) cost margins for smartphone Original Equipment Manufacturers (OEMs). To maintain profitability, brands are forced to raise retail prices or downgrade specifications and inventory for mid-to-low-end models, suppressing overall shipment momentum and leading to a decline in total market demand.
• Shortage of Advanced Packaging Materials: The upstream capacity bottleneck for T-Glass (core material for glass substrates) remains unresolved. This has led directly to a supply deficit and price increases for BT Substrates. This structural shortage has imposed physical capacity constraints on AP suppliers reliant on BT substrates, forcing them to adjust product mixes or delay new launches.

II. Apple: Strong Flagship Momentum; A20 Pro Signals Structural Explosion

Despite the overall market downturn, Isaiah Research maintains a conservative YoY decline of approximately 4% for Apple’s shipments. However, recent positive signals from the supply chain have led us to upwardly revise the absolute shipment figures for 2025 and 2026, making the overall outlook more optimistic than previously expected.

The primary driver for this revision comes from upstream foundry wafer start data. We have observed Apple significantly increasing wafer starts for the A19 and A19 Pro. This reflects Apple's internal confidence in the sales momentum of the iPhone 17 series and a proactive inventory strategy to counter potential supply chain volatility.

More noteworthy is the structural shift in the next-generation products. The A20 Pro chip, designed for the iPhone 18 Pro series and future foldable models, shows explosive shipment potential for 2026—potentially exceeding the combined volume of the A19 and A19 Pro in 2025. This suggests Apple is aggressively expanding its high-end Pro and Foldable lines, where demand remains resilient due to lower price sensitivity. Consequently, we believe there is room for further upward revisions to Apple’s shipment forecasts.

III. Qualcomm: Besieged from All Sides; Divergent Foundry Strategies

Qualcomm faces a relatively grim situation, with an anticipated YoY decline of nearly 5% in 2026. Beyond macro headwinds and substrate shortages, competitive erosion is a key variable. With the strong return of Samsung’s in-house Exynos 2600 expected in the Galaxy S26 flagship series, Qualcomm’s market share within Samsung’s flagship line will take a direct hit. Simultaneously, Qualcomm faces fierce price competition from MediaTek and UNISOC in both 5G and 4G segments.

Qualcomm is adopting a dual strategy of defense and experimentation:

• Delays in TSMC-based Products: Constrained by surging memory costs and market considerations, Qualcomm may postpone the release of its new mid-to-low-end APs produced at TSMC until 2027. For 2026, it will rely on the "legacy product strategy," focusing on the existing SM7750 to leverage cost advantages in price wars. Flagship products are expected to be released as scheduled.
• Opportunities at Samsung Foundry: Progress at Samsung Foundry is a focal point. The new mid-range SM4 series (4nm) is expected to launch on time. More strategically, an SM8 series chip (on Samsung Foundry’s 2nm process) has seen yields jump from under 10% to the 40-50% range. This chip is estimated to be over 30 USD cheaper than the equivalent AP from TSMC. While initial shipments may be limited, this highly cost-competitive option could serve as vital leverage for Qualcomm if successfully integrated into Samsung handsets.

IV. MediaTek: Trading Volume for Price; Targeting Market Vacuums

MediaTek’s total shipments are expected to be revised downward by 3-4% this year. In the 4G AP sector, a three-year supply agreement with Samsung and Samsung's aggressive overseas shipment targets provide a baseline. However, other customers are cutting demand due to memory costs, and UNISOC is competing aggressively on price. The key to a turnaround lies in whether the new 4G APs supporting LPDDR 5/5x receive broad adoption.

MediaTek’s new product strategy demonstrates extreme cost control and market segmentation:

• Low-end Price Wars: Contract prices for new 6nm low-end APs are expected to be lower than previous models, aiming to squeeze competitors out of the market through aggressive pricing.
• Precision Strike with Dimensity 8000 Series: The new mid-range Dimensity 8000 series utilizes the low-cost N3C process, with an expected price less than half that of the flagship Dimensity 9500. It targets the price bracket currently occupied by Qualcomm’s older 4nm products (SM8735), utilizing process generation gaps and cost advantages to fill this market vacuum.
• Flagship Concerns: The transition of the flagship Dimensity 9600 to the 2nm process has resulted in high costs, with shipment momentum expected to be weaker than the previous Dimensity 9500.

V. Other Supplier Dynamics: Samsung LSI, HiSilicon, UNISOC

• Samsung LSI: Expected to be one of the few winners in 2026, with shipments revised upward by 5-10 million units. Growth is driven by the return of the Exynos 2600 to the Galaxy S26 series. As they are no longer launching new 4G products, growth comes entirely from high-margin 5G APs, significantly improving their product mix.
• HiSilicon: Shipments remain steady, benefiting from flat or slightly increasing Huawei smartphone volumes in 2026. Memory and AP supply chains have stabilized, and domestic demand remains robust due to Chinese government requirements for official use of domestic handsets. Huawei’s healthy hardware margins provide a buffer should they choose to gain market share through price cuts.
• UNISOC: Facing a "loss in the low-end, breakthrough in 5G" scenario. With major clients like Xiaomi and Transsion cutting low-end orders, UNISOC’s overall shipment expectations have been lowered. However, in the 5G AP space, UNISOC has successfully secured projects with major brands through aggressive pricing (sacrificing profit despite lack of cost advantage), leading to an expected increase in 5G shipments. However, these gains are not yet enough to offset 4G market losses.

VI. Conclusion

Overall, the 2026 smartphone AP market exhibits a polarized trend: "Technical Showdowns at the High-End, Scorched Earth Pricing at the Low-End." Rising memory prices and substrate shortages have become the "Grey Rhinos" that all players must confront.

For suppliers, chasing the latest process nodes is no longer a panacea. Both Qualcomm and MediaTek are adopting "old wine in new bottles" or "downgraded process" strategies for the mid-range market. This indicates that under high cost pressures, the Cost-Performance Ratio has become the ultimate decider of success. For smartphone brands and supply chain participants, monitoring the supply-demand balance of T-Glass and memory while flexibly adjusting product specs will be the only way to navigate the headwinds of 2026.