AI Phones on the Rise: Counterpoint Predicts 52% Market Penetration by 2027 Amid Industry Challenges

A new report from Counterpoint Research forecasts a significant surge in the adoption of generative AI-enabled smartphones. These devices are projected to account for 45% of all global smartphone shipments by 2026, a notable increase from 36% in 2025. This rapid growth indicates that generative AI is on track to become a standard feature in modern smartphones.

While the adoption of AI phones is accelerating, the market's next phase will be defined by several key factors. According to the report, the primary challenges and competitive differentiators will be actual consumer demand for AI features, the rising cost of memory components, and the ability of different manufacturers to effectively integrate AI into their respective ecosystems.

Paradoxically, this AI boom is occurring amidst a severe contraction in the broader smartphone market. Due to an ongoing memory supply crisis, global smartphone shipments are expected to plummet by 13.9% year-over-year in 2026, falling to 1.08 billion units—a record low. Despite this downturn, the penetration of AI phones is set to continue its upward trajectory, reaching an estimated 52% by 2027.

The sharp increase in memory costs is a dominant factor impacting the entire smartphone market, with its effects outweighing those of any new feature introductions. The entry-level segment has been hit the hardest, as rising component prices are forcing manufacturers to reduce or even cancel their low-cost models. In contrast, high-end AI phones, with their larger profit margins, are better positioned to absorb these costs, potentially strengthening their market dominance. As a result, consumers may face a situation where they pay more for fewer hardware upgrades, as OEMs pass on a portion of the increased costs.

This cost pressure is expected to cause a further polarization of the market. Counterpoint Research predicts that the budget phone segment will continue to shrink while the premium market expands. This trend, combined with consumers holding onto their devices for longer periods, is also likely to fuel growth in the refurbished phone market.

In the long run, memory remains the critical bottleneck determining how quickly generative AI can penetrate the mid-to-low-end smartphone segments. Running AI models requires additional DRAM to store model weights, making it difficult for the wholesale price of AI-capable phones to drop below the $400 mark. The widespread availability of generative AI features in more affordable smartphones will depend on the eventual easing of memory supply pressures and continued improvements in the efficiency of on-device AI model optimization.