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Smartphone Sales to Dip Drastically With Supply And Demand Both Showing a Decline

Worldwide smartphone sales show biggest decline in Q1 2020.
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The global economy is in doldrums with the Covid-19 pandemic hitting all market activity. Millions of people are losing jobs due to businesses taking a hit with all kinds of transactions at a halt. The home lockdown across the world has halted everything in its tracks. Another victim of this trade halt is smartphones.

According to the latest report by research from Canalys, global smartphone shipments fell 13 percent in the first quarter of 2020. The global smartphone shipments dropped from 313.9 million units in Q1 2019 to 272.5 million units in Q1 2020, amounting to a year-on-year (YoY) decline of 13 percent. Another research firm Counterpoint put the drop at 295 million in Q1 2020 compared to 341 million in the previous quarter YoY.

Research firm International Data Corporation (IDC) puts the decline at 11.3 percent, the largest annual decline so far. The smartphone market had seen a recovery in the last two quarters of 2019, after a long slump in sales in 2018. But the pandemic has put paid to any kind of recovery with all shipments stalled.

“Demand for new devices has been crushed,” Canalys Senior Analyst Ben Stanton said in the report. Stanton said, “In February when the coronavirus was centered on China, vendors were mainly concerned about how to build enough smartphones to meet global demand. But in March, the situation flipped on its head. Smartphone manufacturing has now recovered, but as half the world entered lockdown, sales plummeted.”

The bad news for the smartphone manufacturing industry is not over. With the extended lockdown and people hunkering down and saving on non-essential spend the Q2 figures also do not look very attractive for sales of smartphones. “Consumers, under these uncertain times, are likely to withhold making many significant discretionary purchases. This means the replacement cycles are likely to become longer,” Tarun Pathak from Counterpoint Research said, implying users may not buy new devices as quickly.

“Most smartphone companies expect Q2 to represent the peak of the coronavirus’ impact. It will test the mettle of the industry, and some companies, especially offline retailers, will fail without government support.”

China, which saw the outbreak start, was shut for an extended period from February. The country accounts for a quarter of the world’s supply of smartphones. The latest figures show a decline of 20.3 percent y-o-y in China, which has affected the world market.

China also is a major supplier of components for the manufacture of smartphones. There were expectations that the supply chain will be affected due to the coronavirus, but with the pandemic spreading to all parts of the world, the demand side for smartphones has also suffered a huge loss.

Most smartphone companies have reported a decline in shipments. Samsung, the leader, saw a slide of 18 percent. Huawei reported 17 percent, and Apple, which is highly dependent for its parts on the Chinese market, reported a decline of 5 percent.

The opening of the lockdown in China has restored some confidence in the market, but analysts are advocating caution as smartphones are not going to be on the list of buys for many in the coming months.

Nicole Peng, vice president of mobility at Canalys, said that rising unemployment in the manufacturing, retail, travel, and tourism sectors, as well as a sharp decline in company revenue and profits, do not augur well for consumer confidence. This kind of sentiment is bound to push the prices of smartphones down.

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