Mid-range mobile phones make a major retreat

The mobile phone industry is undergoing a reshuffle.

Two major institutions, Gartner and IDC, have given the same prediction: the mobile phone industry has entered a contraction era. The former predicts that the global mobile phone shipments will decline by 8.4% in 2026, while the latter predicts a decline of 12.9%.

In the cold winter, mid - range mobile phones, once the mainstay of the market, are becoming the biggest victims.

In the past few years, the market share of mid - range phones has been gradually eroded. On the one hand, the steadily improving quality of low - end phones has encroached on the basic market. On the other hand, the price cuts of high - end phones have launched a dimensionality - reduction strike. Caught between the two, the market share of mid - range phones has dropped from half to less than 30%.

To make matters worse, in 2026, the price of storage has soared like a storm. Manufacturers have slashed their orders, and most of the cuts are aimed at mid - and low - end models.

The underlying logic is easy to understand. The profit elasticity of mid - range mobile phones is too poor.

Under the industry's "reverse pricing method" logic: high - end phones can command a premium through "stacking features", and have enough profit cushions to hedge against cost fluctuations.

However, the cost structure of mid - range phones is rigid, and the proportion of "unavoidable" rigid expenditures is extremely high. As a result, the cost proportion of storage chips in mid - range phones is more than twice that in high - end phones. This means that reducing mid - range phones is a reasonable choice during the storage cycle.

From a broader perspective, the decline of mid - range mobile phones is just a microcosm of the K - shaped era.

/ 01 / The Squeezed Mid - Range Market

At the beginning of the month, Meizu admitted that the self - developed hardware project for new domestic mobile phones would be suspended. This means that Meizu phones have become a thing of the past.

The withdrawal of Meizu phones is actually a microcosm of the cooling of the mid - range mobile phone market.

Mid - range mobile phones are usually priced between 2000 yuan and 4000 yuan, offering 85% - 90% of the core experience of flagship phones. However, they make trade - offs in non - core and high - cost areas. Their main target group is users with a certain spending power who pursue pragmatism.

This positioning once allowed them to capture the largest common denominator of users. At its peak, mid - range mobile phones accounted for half of the domestic market.

The more glorious they were in the past, the more desolate they are now.

In recent years, the market share of mid - range mobile phones has been on a downward trend. Goldman Sachs data also shows that the market share of the mid - range market has dropped significantly from 35% in 2021 and is expected to fall to 23% by 2027.

Even the national subsidy in 2025 failed to reverse the decline of mid - range phones.

The price range of mid - range phones was originally the segment most covered by the national subsidy. However, the sales volume of mid - range phones did not increase significantly. According to Canalys and Counterpoint data, the sales volume increased by about 4% to 7% year - on - year, but the growth was mainly concentrated at the high - end and low - end extremes.

The growth of low - end phones is not difficult to understand. New consumer giants like Mixue Bingcheng and Mingming Henmang have demonstrated the trend of cost - effective consumption. Low - end phones with cost - effective advantages are naturally guaranteed to grow.

As for high - end phones, just like the growth of luxury goods is not hindered by the downward consumption trend. High - value users will not downgrade due to the macro - environment.

Moreover, the price cuts of high - end phones are also siphoning off the market share of mid - range phones.

For example, the iPhone 16 Pro was included in the national subsidy scope for the first time during the 618 promotion last year, directly driving a nearly 200% surge in Apple's monthly transaction volume. During the Double 11 period, the price of Apple's previous - generation iPhone 16 series dropped by more than 20%, which also led to a trend of "it's better to buy previous - generation iPhones than mid - range phones".

In 2026, mid - range mobile phones also face new challenges on the supply side.

/ 02 / Continued Pressure from Storage

"The price of memory has increased too much. I hope you can understand our sincerity."

While Lei Jun was "putting out the fire" on social media for the price increase of the Redmi K90 standard version, he also pointed out the new challenge for mid - range phones - the dilemma of cost and demand squeeze caused by the memory price increase.

It all starts with the dividends brought by the AI era. Nowadays, the bottleneck of AI inference has shifted from "insufficient computing power" to "insufficient storage capacity".

In short, if the performance of the storage system cannot keep up and fails to transmit data to the GPU and CPU in time, there will be a phenomenon of "GPU waiting in line for data", which will ultimately lead to stuttering and reduced efficiency of AI applications.

This phenomenon has led to the explosion of AI storage, namely HBM, which can perfectly meet the high - bandwidth and low - latency requirements of AI. In 2025, the global HBM market size increased by 300% year - on - year. It not only boosted demand but also increased profits. The operating profit margin of Samsung's DRAM used in traditional consumer electronics is 40%, while that of HBM is as high as 60%.

Capital naturally flows to the place with the highest profit margin. Against the background of limited production capacity and the explosive demand for AI storage, storage manufacturers such as SK Hynix and Samsung have shifted more than 40% of their DRAM (storage products used in consumer electronics) production capacity to HBM production.

As a result, the production capacity of consumer electronics storage has been squeezed. With little change in downstream storage demand, there has been a wave of price increases for storage. On the basis of the storage price doubling in 2025, some institutions predict that the price of storage chips will increase by another 40% - 50% in the first quarter of 2026 and another 20% in the second quarter.

The cost is ultimately passed on to the consumers. After the storage price increase, the mobile phone price has also started to rise. However, the price increase of mobile phones will also lead to a decline in demand. Therefore, many mobile phone manufacturers have cut their annual orders for mobile phones. According to Jiemian News, the models cut by each manufacturer are mainly focused on mid - and low - end and overseas products.

It is understandable to cut the shipments of mid - and low - end products. Mid - range mobile phones have a high proportion of rigid costs and poor profit elasticity.

Specifically, most consumer electronics products such as mobile phones adopt the "reverse pricing method": first set the selling price and profit, and then allocate the cost. Compared with high - end phones, which can command a premium through feature - stacking, have large profit margins and high fault - tolerance rates; low - end phones need to cut costs to the limit, and the proportion of "unavoidable" rigid expenditures in the cost structure is extremely high.

Storage is exactly an indispensable rigid cost for mobile phones, and its cost proportion is even higher. For mid - and low - end phones, storage chips directly account for 20% - 34% of the cost, more than twice that of high - end phones.

Therefore, when facing price increases of components such as storage, high - end phones can still buffer the impact with their profit cushions, while low - end phones have little room for manoeuvre, and their profits are easily eroded. It is reasonable for manufacturers to reduce the production of mid - range mobile phones.

The decline in the market share of mid - range mobile phones is exactly a microcosm of K - shaped consumption.

/ 03 / The Arrival of the K - Shaped Era

In 2020, American financial analyst Peter Atwater proposed the concept of "K - shaped economy". The shape of the letter K accurately describes a new phenomenon: after an economic shock, the recovery path is not a V - shaped parallel progress but a bifurcation. One stroke goes up, and the other goes down.

Compared with the rigid academic explanations, the public may have a more personal experience of the real - life consumption divergence: the rich are queuing up in luxury stores, while many supermarkets are struggling to make ends meet. Pop Mart products are in short supply, while the liquor market is deserted.

The background of the K - shaped differentiation is that we are at the end of an economic cycle and the furious beginning of a technological cycle. The superposition of these two cycles has not brought widespread prosperity yet but has first entered an era dominated by the stock economy.

In an era characterized by the stock economy, the high - net - worth class enjoys the dividends brought by resource and technology monopolies. However, the middle class and the general public have lost the opportunity for class upgrading, and "differentiation" is inevitable.

The differentiation will first be reflected in the lack of middle - level consumption. Japan is a cautionary example.

During the Heisei era, the average salary of office workers declined, which widened the gap between the rich and the poor and accelerated the differentiation of the middle class towards the two extremes. The "M - shaped" society began to take shape, which in turn led to the trend of consumption stratification. At this time, players who targeted the two ends of consumption achieved reverse growth. For example, Kao emerged in the high - end market, and Uniqlo emerged in the high - cost - performance market.

The K - shape is not only limited to the consumption differentiation among classes but also reflected in the consumption transfer of each user.

When the "elevator of the era" is going up, users' "investment/effort behavior" will have a relatively high return rate. At this time, users value practicality and value more, so practical consumer goods once became core assets.

However, when the elevator gradually stops, the return on investment also decreases, which affects everyone's mentality: when hard work no longer necessarily brings rewards, action begins to decline. At this time, "emotional satisfaction" beyond practical functions provides a consumption outlet for people to release their emotions, which is also the background for the rapid rise of Pop Mart.

If we only limit the K - shaped era to the consumption field, it would be a case of seeing only a part and missing the whole picture.

The emergence of new technologies has also brought about industrial differentiation. PwC released a report called Global AI Jobs Barometer, covering six continents. By analyzing nearly one billion recruitment advertisements and thousands of corporate financial reports, it also found traces of K - shaped differentiation:

In industries with the highest AI penetration (financial services, software), since the release of ChatGPT in 2022, the productivity growth rate has nearly quadrupled. In industries least affected by AI (mining, hotels), the productivity growth rate has slightly declined during the same period. The per - capita revenue growth of industries highly exposed to AI is three times that of other industries.

The K - shape has penetrated into every aspect of consumption, employment, and assets, just to different degrees.

This article is from the WeChat official account "Understanding Finance", author: Yang Yang, editor: Xia Yijun. It is published by 36Kr with authorization.