But if the problem is a slower purchase cycle, then the top-tier vendors risk making things worse by making their flagships ever more expensive. It simply prompts many to defer a purchase. Call it a “runaway contagion”, if you like.
In a mature market, YOY volume growth is not always sustainable.
PCs have seen a similar drop in sales volume, but IMHO mostly due to the fact that older PCs are still plenty good enough for a lot of common tasks. It's not like the early days, when a 2-year-old PC would struggle to run current software -- a Sandy Bridge Core i5 box with an SSD will still run MS Office and a web browser quite well, thankyouverymuch. For the non-enthusiast, there's no particular benefit to replacing an appliance that still does what you need.
I think we're seeing a similar phenomenon with phones. I know lots of people (myself included) who are still using phones from the Galaxy S6 / iPhone 6s era or older. As long as the one you have does the job reasonably well, why spend the cash and go through the disruption of changing devices until you have to?
Ironically, that phenomenon could drive prices up, not down. From the user perspective, it's easier to justify spending the extra cash for a premium phone that you'll keep for 2-3 years. From a manufacturer perspective, if they're only going to sell you a phone every 2-3 years then it's in their interest to have premium products that will capture as much revenue as possible from less-frequent sales.
We already see this focus on higher margin and trade-up customers with Google and Apple (and Sammy, to a lesser degree). They're happy to skim off the cream, and let the 2nd-tier manufacturers grind out low-margin devices for the price-sensitive.