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Phone makers face difficult year

Thursday, 14 May 2020, 11:40 am
Article: Digitl

IDC reports shipments¹ of new phones dropped 11.7 percent year on year in the first three months of 2020. That’s a total of 275.8 million phones.

It is the biggest year-on-year drop ever seen.

First quarter numbers are usually lower than the fourth quarter which includes all the phones purchased as Christmas gifts. The fourth quarter usually also captures sales of new phones immediately after the major product launches.

Yet this took place before phone buyers faced the full impact of the Covid–19 pandemic. Sure parts of China were closed down. And China does account for about a quarter of the worldwide new phone market. That’s going to have a huge impact.

Likewise, most of the world’s phones are made in China. Production and the pre-production supply chains were badly affected in the second half of the quarter.

It’s unlikely the current quarter will see much improvement. China may be back at work, but people elsewhere have been, many still are, in lockdown. That’s not great for phone sales. Nor is the economic uncertainty. That new phone sale is an easy expense to cut when the future looks tougher.

Samsung hit hard

While Samsung remains top dog with 58.3 million phones and a 21.1 percent share, it suffered the largest drop in shipments during the quarter. Year on year sales are down 18.9 percent.

There is good news for Samsung. IDC says the higher price of the Galaxy G20 phone means better profits.

Samsung has two important phones scheduled for launch later this year. The Fold 2 and the Note 20 are both likely to be expensive phones at a time when demand for pricey high-end models could cool.

Huawei better than you might expect

The political waves rocking Huawei’s boat have harmed phone sales less than you might expect. Year on year sales are down 17 percent. That’s bad, yet not as bad as Samsung.

Apple’s year on year sales were, in effect, flat with a 0.4 percent decline. This translates into an increased share of the overall market. It has 11.8 percent. The company’s success was mainly thanks to its iPhone 11, which in certain configurations is the most expensive non-folding handset.

IDC says that if the trend to lower price phones continues, and let’s face it that looks likely, Apple should have a hit on its hands with the iPhone SE.

What next?

To get an idea of how this quarter could go, Qualcomm, which makes chips for mobile phones, says it expects a 30 percent year on year drop for the current, second quarter. Given that it takes orders from phone makers ahead of manufacturing, it has a good handle on the market. That would be a huge drop.

IDC suggests a bright spot could be 5G. People need new handsets to use the faster wireless technology. It’s possible customers will trade up to 5G phones later in the year.

On the flip side of this, most users won’t notice any performance difference from switching to 5G. Data will download faster, but at the time of writing there are no mobile apps that can use faster data speeds.

Shipments is industry talk for products that have left the warehouse en route for customers. While a shipment is not the same as a sale, it is close enough. Retailers don’t tend to carry huge inventories of product these days. ↩︎

Phone makers face difficult year was first posted at billbennett.co.nz.

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