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COVID-19 hits smartphone market, record declines expected

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The COVID-19 pandemic is having a growing impact on the global economy, with the effects of the virus eroding gains in the global smartphone market, according to research firm TrendForce.

Currently, there are over 2.2 million COVID-19 cases globally and over 228 000 deaths, with more than a million recoveries. This has resulted in many countries placing their nations under lockdown to try to minimise the spread of the virus.

The global lockdowns have led to a huge economic bump in almost all sectors.

The smartphone market has also suffered this fate. TrendForce says global production in the first quarter of 2020 (1Q20) fell by 10% year-on-year (YOY) to around 280 million units, the lowest in five years, due to pandemic-induced disruptions across the supply chain.

The firm says disruptions include delayed work resumption and labour/material shortages, which caused low factory capacity utilisation rates.

While it says there are now improvements to the supply chain and work resumption at manufacturing and assembly lines, the pandemic is making its effects felt on the demand side of the smartphone market by tanking major economies worldwide.

“Global production for 2Q20 is now estimated to register another YOY drop of 16.5% to 287 million units, the largest decline on record for a given quarter. TrendForce forecasts total yearly production volume of 1.24 billion units, an 11.3% decrease YOY,” it says.

Vivo endures

According to TrendForce, Vivo is the only brand among the top six to show growth in the first quarter of this year.

It says Samsung will experience constrained growth this year even without the emergence of COVID-19. “In addition to the saturation of the market, Chinese brands are exerting continuous pressure on Samsung’s presence in the Southeast Asian and Indian markets by the day.

“Most of Samsung’s smartphone assembly lines are located in Vietnam and India, and the company possesses about only 2% of the market share for smartphones in China. Its production was thus not significantly affected by issues related to the disease during the initial phase of the outbreak in China.

“Nevertheless, the rapid spread of the disease across North America and Europe in the later part of 1Q20 compelled Samsung to lower its device output even as its factories were running as usual.”

TrendForce says Samsung’s production volume for 1Q20 came to 65.3 million units, showing a YOY drop of 9.9%. The firm estimates Samsung’s smartphone production for 2Q20 will fall by 10.7% quarter-on-quarter (QOQ) to 58.3 million units.

Similarly, the research firm says Huawei, which took second place in the production ranking for 1Q20, was able to have its device assembly lines resume work soon after the Lunar New Year holiday.

“This brand has seen a steep decline in overseas sales due to its new devices being excluded from Google Mobile Services. Nevertheless, demand from China, which is its primary market, has started to recover. With the support of domestic demand, Huawei’s smartphone production for 1Q20 came to 46 million units, in line with TrendForce’s earlier projection.”

According to TrendForce, if China’s economy continues to improve, Huawei’s production for 2Q20 may register a QOQ growth and reach approximately 48 million units.

“Huawei is sticking with its plan of making a push for its 5G smartphones this year, but 4G models will still account for most of its 1H20 smartphone output, and Huawei is also holding a significant inventory of 4G models.

“Therefore, Huawei’s greatest challenge at the present is to simultaneously develop an effective campaign to promote the latest 5G smartphones and sell off the existing stock of 4G smartphones,” says the firm.

Smartphone replacement cycle

Prior to the onset of COVID-19, TrendForce says it had originally expected Apple to once again reach yearly production of 200 million units, owing to the release of five new models this year and the phasing out of the popular iPhone 6S series by the seasonal smartphone replacement cycle.

However, it says: “Apple fell victim to the influence of the coronavirus pandemic, resulting in the reduced production of its iPhone line-ups this year. In terms of 1Q20 performance, iPhone production fell by 8.7% YOY, reaching 37.9 million units, due to labour and material shortages following the post-Lunar New Year work resumption, in turn ranking Apple in third place.”

TrendForce notes that as the company releases the new iPhone SE with a consumer-friendly price tag in 2Q20, quarterly iPhone production is expected to stay relatively close to 1Q20 figures, reaching 36 million units.

“Apple is still planning to release four new 5G handsets in 2H20, but whether the pandemic’s influence will weaken the demand for iPhones going forward remains a noteworthy concern, since iPhones sell at a relatively high retail price, and the iPhone’s primary sales regions are the European and US markets, which are in the midst of dealing with COVID-19.”

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