China smartphone May shipments +19% YoY, but memory cost pressure still weighs on 2Q26 demand expectations

Overview

This report tracks changes in China’s smartphone industry in May across shipments, 5G penetration, the number of new model launches, and camera specifications. Goldman Sachs believes that May shipment data looked strong on the surface, with smartphone shipments up 19% YoY and 7% MoM, and 5G smartphone shipments up 24% YoY; however, high memory costs are weighing on demand, so it forecasts 2Q26 shipments to decline 14% YoY. In terms of product specifications, the number of cameras per handset continues to fall from historical highs, but the share of 20MPx+ cameras has risen significantly, indicating that the industry’s upgrade direction is shifting from “more cameras” to “higher pixel specifications.”

Core views

Core views include: first, China smartphone demand continued to improve sequentially in May, but on a quarterly basis it may still be affected by rising memory costs; second, 5G smartphones have become the absolute mainstream, with penetration reaching 95% in May; third, the pace of new model launches slowed markedly in May, with new smartphone models down 44% YoY; fourth, structural upgrades in camera configurations are still advancing, with 20MPx+ becoming the main contributor category; fifth, Goldman Sachs continues to favor certain smartphone supply chain names, including Hon Hai, AAC, Lingyi, Largan, SZS, Fositek, and TSMC.

Analysis framework

The report mainly combines monthly industry data tracking with product specification breakdowns: it uses MIIT-published China mobile phone and 5G mobile phone shipment data and counts of new model launches to compare year-over-year and month-over-month changes; at the same time, it reviews camera counts and pixel distributions in models launched since the start of 2026 by major brands such as Honor, Xiaomi, OPPO, Vivo, and Transsion to assess the direction of smartphone specification upgrades.

Methodology notes

• Industry data trackingMIIT monthly shipment and new model monitoring

  Assess industry demand and supply cadence through monthly shipments, year-over-year and month-over-month changes, 5G penetration, and the number of new models.

  The report cites MIIT data and compares shipments of mobile phones, smartphones, and 5G smartphones, as well as the number of newly launched models, from May 2025 to May 2026 to identify short-term demand trends.

• Product specification analysisSmartphone camera pixel structure breakdown

  Count camera configurations by brand and pixel band to determine whether specification upgrades are continuing.

  The report counts 165 models and 487 cameras since the start of 2026, compares the shares of 2MPx/5MPx/8MPx and 20MPx+, and points out that while the number of cameras has declined, high-pixel penetration has increased.

• Goldman Sachs internal frameworkGS Factor Profile

  Compare stock characteristics across growth, financial returns, valuation multiples, and composite metrics.

  The disclosure section states that GS Factor Profile is used to compare key stock attributes with the market and industry peers, but the main body of this report still focuses on monthly industry data and supply chain views.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hon Hai

  Preferred buy name in the smartphone supply chain

  Strengths

  Benefits from improved smartphone assembly and supply chain conditions, and is included on Goldman Sachs’ buy list with an on CL designation.

  Weaknesses

  If 2Q26 shipments decline YoY, contract manufacturing orders and capacity utilization may come under pressure.

  Comparison

  Like other smartphone supply chain names, it benefits from 5G and premiumization trends, but is more sensitive to end-market shipment volumes.

  Risks

  Rising memory costs weighing on end demand, slower pace of new model launches by brands, and supply chain pricing pressure.

• AAC

  Preferred buy name in smartphone components

  Strengths

  May benefit from smartphone specification upgrades and demand for high-end components.

  Weaknesses

  If overall industry shipments fall short of expectations, component order growth may slow.

  Comparison

  Compared with contract manufacturing, component companies depend more on higher content value per handset and specification upgrades.

  Risks

  Weak end demand, price competition, and changes in customer product mix.

• Largan

  Preferred buy name in the camera supply chain

  Strengths

  The rising share of 20MPx+ cameras aligns with the trend of camera specification upgrades.

  Weaknesses

  The decline in the number of cameras per handset may partly offset the content value uplift from higher pixel specifications.

  Comparison

  Compared with the standard low-pixel camera chain, high-pixel lens suppliers benefit more directly from specification upgrades.

  Risks

  Weaker-than-expected demand for high-end lenses, downgraded brand configurations, and intensified competition.

• TSMC

  Preferred buy name in the semiconductor supply chain

  Strengths

  Smartphone premiumization, 5G penetration, and chip specification upgrades may support demand for advanced process nodes, and it is included on Goldman Sachs’ buy list with an on CL designation.

  Weaknesses

  Volatility in smartphone end-market shipments may affect the cadence of related chip orders.

  Comparison

  Compared with smartphone brands and assemblers, TSMC is driven by demand across multiple end markets, with smartphones being only one important downstream segment.

  Risks

  Slower end demand, customer inventory adjustments, and semiconductor cycle volatility.

• China smartphone industry

  Subject of the report

  Strengths

  May shipments +19% YoY, 95% 5G penetration, and a higher share of high-pixel cameras.

  Weaknesses

  High memory costs are suppressing demand, 2Q26 shipments are expected to decline 14% YoY, and new model launches were down 44% YoY in May.

  Comparison

  Compared with 2025, the number of cameras has edged down year-to-date 2026, but the share of 20MPx+ is higher, with industry upgrading shifting from quantity to quality.

  Risks

  Rising costs, pulled-forward demand, slower new product launches, and weaker-than-expected specification upgrades.

Key data

• May China smartphone shipments27 million units, +19% YoY, +7% MoMMIIT data; April was +12% YoY and +25% MoM.
• May China 5G smartphone shipments26 million units, +24% YoY, +6% MoM5G smartphone penetration was 95%.
• May China newly launched smartphone models15 models, -44% YoYApril was 50 models, +56% YoY; May declined significantly versus April.
• Major brand sample since the start of 2026165 models, 487 camerasCovers brands including Honor, Xiaomi, OPPO, Vivo, and Transsion.
• Average number of cameras3.0 per model since the start of 2026Below 3.1 in 2025 and the 3.8 peak in 2022.
• Share of 20MPx+ cameras65% since the start of 2026Above 57% in 2025, 52% in 2024, and 39% in 2023.
• Share of low-pixel cameras2MPx/5MPx/8MPx combined 24%Below 31% in 2025 and 36% in 2024, indicating a declining share of low-pixel configurations.
• 2Q26 shipment outlook-14% YoYGoldman Sachs believes high memory costs will weigh on demand.

Impact & implications

For investors, the report conveys a signal of “improving short-term shipment data but unresolved cost pressure.” High 5G penetration and a rising share of high-pixel cameras are positive for high-end components, camera modules, precision parts, contract manufacturing, and the semiconductor supply chain; however, if memory costs continue to rise, end brands may face pressure on pricing, margins, and shipment cadence, which could in turn affect the elasticity of component orders. The market should distinguish between volume improvement and structural upgrading: a monthly rebound in shipments does not necessarily mean a full recovery in quarterly demand, while high-pixel upgrades may provide more stable structural opportunities for high-quality supply chain companies.

Risks

• Memory costs continue to rise, further suppressing end demand and brand gross margins.
• The YoY decline in 2Q26 shipments could be larger than expected, weakening supply chain order elasticity.
• The sharp drop in the number of new model launches may reflect insufficient product cadence or weak demand confidence at the brand level.
• The decline in the number of cameras per handset may offset part of the value uplift from high-pixel upgrades.
• Industry data are subject to monthly volatility, and improvement in a single month’s shipments does not necessarily mean the demand trend has fully reversed.

What to watch

• Whether China smartphone and 5G smartphone shipments continue their month-over-month improvement in June and subsequent months.
• Whether actual 2Q26 shipments validate Goldman Sachs’ forecast of -14% YoY.
• The impact of memory prices and full-device BOM cost changes on brand pricing, promotions, and shipment plans.
• The pace of new model launches in 2H for brands such as Honor, Xiaomi, OPPO, Vivo, and Transsion.
• Whether 20MPx+ camera penetration continues to rise and whether the share of low-pixel cameras continues to decline.
• Order, revenue, and margin guidance from supply chain companies such as Hon Hai, AAC, Lingyi, Largan, SZS, Fositek, and TSMC.