China Smartphone Market Shrinks as Apple and Huawei Pull Further Ahead Amid Soaring Memory Chip Prices

China's smartphone market contracted in the second quarter as rising memory chip prices squeezed manufacturers' margins, pushing the industry toward a smaller number of premium devices even as Apple and Huawei extended their dominance at the top of the market.

Smartphone shipments in China fell 2% in the April-to-June period compared with the same quarter last year, according to data released Tuesday by market research firm Counterpoint Research. The decline came as manufacturers, facing a sharp jump in the cost of memory semiconductors, scaled back production plans and prioritized protecting profit margins over expanding sales volume. The result was a more polarized market, with high-margin premium phones increasingly displacing cheaper models that became less economical to produce.

Huawei held on to the top spot in China with a 23% market share after increasing shipments 24% from a year earlier, its strongest showing since the fourth quarter of 2020. The company's growth was driven largely by strong demand for its flagship Enjoy 90 Pro Max line, along with an expanding base of premium buyers drawn to its wide foldable device, the Pura X Max.

Apple posted an even sharper gain. The company increased shipments 23% year-over-year, lifting its share of the Chinese market from 15% to 18%. Industry analysts pointed to two forces behind the surge. As component costs pushed up prices across the Android ecosystem, the iPhone's comparatively stable pricing became more attractive to Chinese consumers. At the same time, expectations that Apple's upcoming iPhone 17 series will carry a higher price tag appear to have pulled forward demand, with buyers rushing to purchase current-generation models before any increase takes effect.

The gains by Apple and Huawei came largely at the expense of China's domestic mid-tier brands. Oppo and Vivo both held steady at 16% market share apiece, essentially treading water in a shrinking market. Xiaomi and Honor fared worse, with Xiaomi's share falling to 13% and Honor's to 11%, each down two to three percentage points from a year earlier. All four companies have rolled out new devices this year, including Oppo's Reno 16 series and Xiaomi's Redmi K90, but none have been enough to close the widening gap with the market's top two players.

The shakeup underscores how a global surge in memory chip prices is reshaping competitive dynamics across the consumer electronics industry, not just in smartphones. Memory semiconductors, including the DRAM and NAND flash chips used in phones, laptops and data centers, have seen costs climb sharply this year amid tight supply and surging demand tied to artificial intelligence infrastructure buildouts. For smartphone makers operating on thinner margins, the added cost pressure has made it harder to compete on price, a dynamic that favors companies like Apple and Huawei with stronger brand pricing power and more resilient premium demand.

Industry analysts expect the pressure to intensify in the back half of the year. Once memory chips purchased at today's elevated prices work their way through manufacturers' supply chains and into finished devices, consumers are likely to see broader price increases across the market. Analysts caution that if those increases materialize as expected, they could dampen consumer appetite for new phones and weigh further on overall shipment volumes heading into the holiday season.

The trend in China mirrors broader unease across Asia's technology sector this week. Memory chip costs have become a flashpoint for markets more broadly, with rising prices for components tied to artificial intelligence hardware rattling investors and manufacturers alike. In South Korea, home to major memory chipmakers Samsung Electronics and SK hynix, equity markets have swung sharply in recent sessions as investors try to gauge whether the AI-driven chip boom will keep pushing up costs for downstream device makers or whether a pullback in AI infrastructure spending could ripple through the memory supply chain.

For China's smartphone industry specifically, the second-quarter data suggests a market increasingly bifurcated between a shrinking pool of affordable options and a growing appetite for premium devices from Apple and Huawei. That divide could deepen if component costs keep climbing, potentially accelerating a consolidation of Chinese consumers' smartphone spending toward the two market leaders while squeezing out lower-cost competitors that once thrived on volume.

Huawei's rebound has been particularly notable given the company's struggles in prior years under U.S. export restrictions that limited its access to advanced chipmaking technology. Its resurgence to a market-leading position, powered in part by domestically produced chips and an aggressive foldable phone strategy, marks a significant shift in China's competitive landscape. Apple, meanwhile, has leaned on its relative insulation from China's domestic Android price wars to post some of its strongest shipment growth in the market in recent years.

Whether the current dynamic holds through the rest of 2026 will depend heavily on how far memory prices continue to climb and how manufacturers choose to pass those costs on to consumers. Counterpoint Research's data suggests that, for now at least, China's smartphone buyers are increasingly willing to pay a premium for devices from the market's two biggest brands rather than trade down to cheaper alternatives from struggling domestic rivals.