Smartphone Production to Fall by 16.5% Globally in June Quarter
The smartphone industry is experiencing a severe hit ever since the lockdown started. Mass shutdowns, which have been imposed by the governments across the world to prevent the spread of COVID-19, has resulted in the lowering of productions in almost every sector worldwide. This has significantly halted all the crucial operations in the smart phone industry as well, which include production and supply chain disruptions.
Despite several measures adopted by the top smartphone manufacturers, lockdown has changed and altered the entire market scenario, further leading to a drop in the market value of the global smartphone industry. It has been estimated that the shipments in the smartphone market have fallen below 300 million units for the first time since 2014. It can be seen as the worst smartphone market contraction in history.
The production rate in the industry is expected to fall by 16.5% to 287 million smartphones in the June quarter in the comparison to the last year. Chances are, it will take several months to get back on the track even if the supply chain resumes post-shutdown.
Some of the biggest and most prominent brands in the global smartphone market, that is, Samsung Electronics and Apple Inc are also expected to experience the repercussions of the pandemic, although they will continue to retain their positions in the global market. These two players hold the first and third positions respectively in the market, yet both the companies might lose their market share to the Chinese smartphone manufacturers. During the March quarter, a further 10% drop in the global production was recorded as the pandemic spread and peaked in China before entering the regions like the United States and Europe.
The outbreak, which began with the worries of keeping up with the production and procure raw materials to meet the growing demand for smartphones, has culminated into a much vulnerable situation, that is, the disruption from supply to demand. The outbreak, which started from China, has now reached almost every part of the world, thus, making its effects felt on the demand side of the smartphone market. It has tanked major economies worldwide, which has led to the reduction in demand for smart phone and disruption in supply chains as almost half of the world enters lockdown. Now, even if the production reaches a stable point, it would be difficult for smartphone manufacturers to sell the products with reduced demand and disrupted supply chains.
In a bid to tackle the situation and maintain its position, Apple, not only reduced the prices of iPhone 11 in China but also launched a $399 iPhone variant. The company targeted the Chinese market with the aim to find some buyers in the frugal economy since it is the only major market where Apple stores are still running.
Despite their efforts, iPhone production fell almost 9% to approximately 38 million units in the quarter of March, and after this, it is expected to fall by another 2 million units. Apple’s market share is anticipated to fall to 12.6% by this quarter as compared to the last quarter when it held a share of about 13.5%. On the other hand, Samsung’s market share is expected to ease 3% points to 20.3% in the June quarter. As the major smartphone market like India enters mass shutdown to curb the spread of the pandemic, the overall smartphone industry is expected to experience a significant downfall in product demand.
Some of the brands with a larger share in China, like Huawei, are going to be in a better position as compared to the other brands like Samsung, for which almost all its major markets are closed following the lockdown. China’s smartphone brand Huawei saw slow revenue growth in the first quarter of the year 2020, but currently, it is expected to manufacture approximately 48 million smartphones in the June quarter in order to meet the steadily growing domestic demands, up 2 million from the March quarter. Following the same pattern, almost all the Chinese smartphone brands such as Xiaomi, Oppo, and Vivo are expected to grow further and gain market share in the June quarter.
Even after being the prominent leaders in the global smartphone market, Apple and Samsung could not tackle the downfall brought on by the Covid-19 pandemic. But as China was the first region to witness and experience this pandemic, it has not only started recovering from it but is also expected to dominate the global smartphone market. On the supply side, China being an OEM was in the worst state during the Q1 of the year 2020. However, in the second quarter, as the region’s manufacturing conditions recover, the market scenario is expected to change for China. On the other hand, other manufacturing centres will still struggle to find the consumer base and return to their normal production state while being closed under lockdown.
The worst scenario of the pandemic is yet to be seen. Most smartphone brands are expecting second quarter of the year to show the actual peak of the coronavirus’s impact on the smartphone market. If the situation does not improve, some companies, such as the entry-level segments and the offline retailers, are expected to collapse without the help of government. The governments across the nation must offer some kind of support to these small retailers in order to help them sustain during this pandemic.