Smartphone Shipments Set to Plunge 12% Amid U.S.-Iran Conflict

Escalating military tensions between the United States, Israel, and Iran have triggered alarms across the global smartphone supply chain. With memory chip prices already squeezing manufacturers, concerns over Middle East logistics disruptions and rising oil prices are turning shipment decline forecasts into reality.

In a report released Monday, market research firm Counterpoint Research warned that prolonged military tensions in the Middle East would create structural pressure across the entire smartphone supply chain.

The report noted that last year's military clashes between Israel and Iran caused only short-term volatility in smartphone markets across the Middle East, Europe, Africa, and the Americas. However, this time the situation is likely to drag on longer as broader objectives including regime change are involved. The smartphone industry's dependence on logistics stability makes it particularly vulnerable to such shocks, the report said.

Middle East Air Routes Face Direct Hit

The vast majority of global smartphone shipments move by air cargo. Short product replacement cycles and intense market competition force companies to choose air transport despite higher costs than sea freight.

The problem is that many major air cargo routes pass through the Middle East. Dubai International Airport in the United Arab Emirates and Hamad International Airport in Qatar have served as critical transshipment hubs for technology products. Cargo is consolidated and redistributed through these airports before heading to Europe, the U.S. East Coast, and Africa.

Alternative routes bypassing the Middle East do exist. Europe-bound cargo can use Tashkent in Central Asia, while U.S. East Coast shipments can route through East Asia and North America. Addis Ababa and Egypt are cited as alternatives for some African destinations.

However, rerouting means higher costs. Counterpoint estimates that bypassing Middle East routes adds at least two to three hours of flight time. Three additional hours alone can increase fuel costs by approximately $25,000. If total flight time increases by 12 to 14 hours or more due to long-distance detours, crew augmentation could add another $24,000 or more in labor costs. Ground handling fees, insurance premiums, and other labor costs would add further burdens.

Strait of Hormuz Variable Raises Oil Price Concerns

Iran's announcement of a potential Strait of Hormuz closure adds another risk factor. The strait is a critical shipping lane through which approximately 20% of the world's oil supply passes. If the blockade materializes and oil prices surge, aviation fuel costs would likely spike in tandem.

Logistics cost increases may appear limited on a per-flight basis. But when flights carrying hundreds of thousands of smartphones repeat regularly, cumulative costs become substantial. This ultimately raises per-device costs and could gradually pressure global smartphone makers' margins, pricing strategies, and inventory management, according to the report.

Memory Shortage Compounds 'Double Pressure'

Supply chain instability is intensifying alongside memory chip shortages. Counterpoint noted that high memory prices were already straining smartphone manufacturers' cost structures before logistics risks emerged.

As a result, global smartphone shipments this year are forecast to fall 12% year-on-year to approximately 1.1 billion units. This would be the lowest level since 2013, effectively setting the market back a decade.

Counterpoint said severe supply-driven memory shortages could persist through next year. With a shrinking market and limited capacity to absorb price shocks, industry restructuring is becoming the baseline scenario, the firm assessed.