On Wednesday, the latest device market outlook from International Data Corporation (IDC) indicated that the global PC market could face a contraction of up to 9% in 2026, driven by soaring memory prices. This pessimistic forecast significantly exceeds the 2.5% decline projected by the institution in November, marking a sharp deterioration in the industry's prospects.

IDC pointed out that the global memory shortage, which has accelerated since mid-October last year, has exceeded its initial model expectations. Under a neutral scenario, PC shipments are expected to fall by 5%, while a pessimistic scenario could see a decline of up to 9%. Although IDC has not yet formally revised its official forecast, its latest scenario analysis is clearly more pessimistic than it was just weeks ago.

The root of this crisis lies in the surging demand for AI infrastructure. Hyperscale cloud service providers' demand for memory has increased substantially, leading to a shift in DRAM and NAND production away from consumer devices towards high-margin enterprise-grade components like high-bandwidth memory and high-density DDR5. IDC emphasized that this is not a typical cyclical fluctuation but rather a strategic reallocation of silicon production capacity that could last for years.

For the PC industry, this memory shortage coincides with two critical periods: the end of support for Windows 10 and the promotion of "AI PCs," making the market outlook even more severe.

Price pressures are being transmitted to the end market. As DRAM and SSD costs climb, PC manufacturers have already begun signaling widespread price increases. IDC estimates that in a pessimistic scenario, the average selling price (ASP) of PCs could rise by 6% to 8%, while shipments might decline by nearly 9% year-on-year. This forecast is a significant downward revision from the already negative -2.4% expectation in November.

The smartphone market is also under pressure. Memory constitutes a significant portion of handset bill-of-materials costs, especially for mid-range models where profit margins are already thin.

IDC warned that handset manufacturers might respond by raising prices, reducing specifications, or a combination of both, which would reverse the trend of the past decade where flagship-level storage configurations trickled down to lower tiers. In a pessimistic scenario, the global smartphone market could shrink by 5% in 2026, accompanied by rising average selling prices and extended replacement cycles.

Large manufacturers gain an advantage, while smaller ones face pressure. IDC expects that large OEMs like Dell, HP, Lenovo, and Asus, with their scale advantages, inventory leverage, and long-term supply agreements, will navigate this environment better than smaller manufacturers. Regional small brands, white-box assemblers, and DIY system builders face considerably higher risks, particularly in the gaming PC segment where high-memory configurations are standard and cost sensitivity is high.

This dynamic could further shift market share toward the major OEMs, even as the overall market size shrinks.

AI PC promotion encounters a cost dilemma. The memory shortage creates a peculiar contradiction with the promotion of AI PCs. IDC defines an AI PC as a system equipped with an NPU, but these machines also actually require more memory. Microsoft's Copilot+ requirements, for instance, set a minimum threshold of 16GB, with many high-end designs aiming for 32GB or higher. The problem is that memory is precisely the component that is currently most scarce and expensive.

Complicating matters further, the marketing push for AI PCs has not yielded the growth manufacturers hoped for. User enthusiasm is limited, and dissatisfaction with the rapid, often forced, integration of AI features in Windows 11 is becoming increasingly apparent. Against this backdrop, the high price of AI PCs looks more like a "tax" on features that many buyers did not request.

Risk of a historic recession emerges. A 9% decline, while not catastrophic, is quite severe. During the 2009 global financial crisis, the PC market fell by 11.9%, setting a record for the largest decline at the time. The only worse situation occurred in the post-pandemic period, when the market dropped by nearly 15% due to oversaturation, an impact from which the industry has still not fully recovered.

More worryingly, this potential recession is happening in 2026, a year that was supposed to be a major growth period. Strong growth was anticipated due to the end of Windows 10 support and the AI PC wave.

IDC's conclusion is cautious but clear: trends originating from the AI infrastructure boom are reshaping the consumer hardware market in unexpected ways. Memory scarcity is tightening supply, pushing up prices, and forcing manufacturers to rethink product roadmaps at a most inopportune time.