Qualcomm has signalled potential turbulence ahead for the global smartphone market, revealing that several handset manufacturers are planning to cut production amid an ongoing memory component shortage.The disclosure came during Qualcomm’s Q1 FY2026 earnings call, where the chipmaker despite posting strong quarterly results—offered a cautious outlook for the coming months.

According to the company’s leadership, the issue is not weak consumer demand, but a tightening supply of critical memory components, particularly DRAM, which is beginning to disrupt smartphone manufacturing plans worldwide.

Strong Q1 Performance, But Softer Outlook for Q2 2026

Qualcomm reported robust financial performance for the first quarter of fiscal year 2026, with revenue reaching $12.2 billion, beating market expectations. However, the company simultaneously projected a noticeable slowdown for the second quarter, forecasting revenue between $10.2 billion and $11 billion.

This sequential decline raised questions among investors and analysts, many of whom initially attributed the softer outlook to seasonal demand fluctuations in the smartphone industry. Qualcomm’s leadership, however, was quick to clarify that the underlying cause lies elsewhere.

DRAM Shortage Emerges as the Core Challenge

During the earnings call, Qualcomm CFO Akash Palkhiwala directly pointed to a global shortage of memory components especially DRAM as the primary factor impacting near-term revenue expectations.

He explained that rising demand for advanced memory solutions from AI data centres is creating supply uncertainty for smartphone manufacturers. Memory suppliers are increasingly prioritising high-margin products such as High Bandwidth Memory (HBM), which is essential for AI workloads, leaving fewer resources available for consumer electronics.

As a result, smartphone brands are being forced to reassess their production strategies.

“We’ve seen several OEMs, especially in China, take actions to reduce their handset build plans and channel inventory,” Palkhiwala said, highlighting a cautious approach adopted by manufacturers in response to memory availability and pricing volatility.

Chinese Smartphone OEMs Among the Most Affected

Qualcomm revealed that multiple Chinese smartphone brands have already begun scaling back handset production plans. These reductions are not necessarily a reflection of weaker end-user demand, but rather a strategic move to manage component risk and avoid inventory build-up during a supply-constrained period.

China remains one of the world’s largest smartphone manufacturing hubs, and production adjustments there often ripple across global supply chains. Any sustained slowdown could impact device availability, pricing strategies, and launch timelines in multiple regions.

Consumer Demand Remains Strong, Says Qualcomm CEO

Qualcomm President and CEO Cristiano Amon reinforced that demand for smartphones has not softened. Instead, he stressed that the company’s conservative Q2 outlook is entirely driven by supply-side constraints.

Amon explained that memory manufacturers are diverting capacity toward AI-focused infrastructure, as hyperscale data centres continue to expand aggressively. This shift is creating a structural imbalance in memory allocation between enterprise AI use cases and consumer devices like smartphones.

Notably, Amon declined to provide a definitive timeline for when the memory shortage might ease, suggesting uncertainty could persist well beyond the current quarter.

Mid-Range and Budget Smartphones Likely to Face Greater Pressure

While premium smartphone models may fare better due to higher margins and stronger supplier relationships, Qualcomm hinted that mid-range and budget devices could be hit hardest.

Amon suggested that memory availability will likely shape the overall smartphone market throughout the fiscal year, influencing how brands price devices and position different product tiers.

As costs rise and memory becomes scarcer, manufacturers may prioritise high-end models, potentially squeezing affordable smartphone segments where margins are already thin.

No Manufacturer Completely Immune to the Supply Crunch

Qualcomm also cautioned that even the largest and most resilient smartphone brands are not entirely shielded from the ongoing shortage. While capacity expansion plans are underway across the memory industry, actual availability will depend heavily on how quickly AI data centre investments continue to scale.

If AI-driven demand accelerates further, consumer electronics including smartphones could remain under pressure well into 2027.

What This Means for the Smartphone Market Ahead

Qualcomm’s comments offer a clear signal that the global smartphone industry may enter a period of constrained supply rather than reduced demand. Production cuts, delayed launches, and potential price adjustments are all possible outcomes if memory shortages persist.

For consumers, this could translate into fewer choices in the budget and mid-range segments, while premium devices become more prominent. For manufacturers, careful inventory planning and component sourcing will be critical over the coming quarters.

Conclusion

Qualcomm’s Q1 FY2026 earnings call has highlighted a growing challenge for the smartphone ecosystem: a global memory shortage driven by surging AI infrastructure demand. While consumer interest in smartphones remains strong, limited DRAM availability is already forcing OEMs—particularly in China—to scale back production plans.

As AI data centres continue to reshape the semiconductor supply chain, the smartphone market’s trajectory in 2026 and beyond may depend less on demand trends and more on how quickly memory supply can catch up.