The crisis in the Middle East has now entered its fourth week, and its repercussions could extend to certain Indian industries. The smartphone market is already beginning to feel the pressure; analysts have once again lowered their shipment forecasts, as the conflict begins to impact both demand and supply dynamics.
Research firms have revised downward their projections for 2026, signalling an increasingly challenging road ahead. According to Counterpoint Research, shipments are now projected to stand at 139 million units, down from an earlier estimate of 142 million, while Omdia has lowered its forecast from 148 million to a range of 142-145 million units. Analysts warn that if the situation does not improve, these figures could be subject to further revision.
IDC has adopted a more cautious stance on the matter; it projects that shipments, having stood at 152 million units in 2025, will decline to 132 million units in 2026.
These downward revisions also reflect the ongoing shortage of key components, such as memory and storage, which has further intensified the pressure on the industry. Since the onset of the COVID-19 pandemic, this marks the most significant downward revision to future forecasts to date.
Ongoing Tensions in the Middle East
The ongoing tensions in the Middle East have further exacerbated the prevailing uncertainty. With the rising cost of essential goods, consumers may opt to curtail their discretionary spending, a category that includes smartphones. Industry insiders suggest that the true impact of this crisis is likely to be felt most acutely during the second half of the year. Upasana Joshi, Research Manager at IDC India, told ET: “Market conditions are currently very poor, and the second half of the year is expected to be even worse.”
Signs of waning demand are already becoming apparent, particularly within the mass-market segment. Tarun Pathak, Research Director at Counterpoint Research, told this financial newspaper, “The Iran-Israel conflict is creating an atmosphere of uncertainty, and in such an environment, consumers tend to defer discretionary purchases like smartphones.”
In response, companies are becoming more cautious; they are reducing their inventory, collaborating closely with retailers, and offering special incentives to sustain sales in a weak market.
Second Half of 2026 Could be Particularly Challenging
Sanyam Chaurasia, an analyst at Omdia, stated that the second half of 2026 could be particularly challenging, as rising oil and logistics costs are expected to impact rural incomes and agricultural output. Rural markets are likely to bear the brunt of this impact, while retailers, too, are shying away from holding excess inventory due to subdued demand.
The sector is also grappling with supply-related challenges. Earlier this year, most brands had already raised prices as the cost of memory and storage components surged by 40–50%, driven by massive demand from AI data centres, prompting suppliers to divert their production capacity elsewhere.
Now, the disruptions emerging in West Asia are expected to exacerbate the situation further. Trade routes have been disrupted, and concerns regarding the supply of helium, a critical element for semiconductor manufacturing, have intensified. Qatar, a major supplier of helium, has halted gas shipments; this is likely due to damage sustained by its own production facilities.
All these factors are likely to drive up production costs even further, a burden that will ultimately be passed on to consumers, thereby exerting even greater downward pressure on demand.
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