The first quarter of 2020 has been difficult for the global smartphone market, with shipments declining 8.9% compared to the same period last year, according to IDC. This decline can be attributed to the softening global demand for smartphones due to the COVID-19 pandemic and its associated economic fallout.
This article will look at the decline in smartphone shipments and its implications for the global economy.
Overview of the Global Smartphone Market
The latest data from the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker shows that global smartphone shipments declined 8.9% in the first quarter of 2019 compared to a year ago. The decline is the second consecutive quarter of negative year-on-year growth, underlining weakened consumer demand across key markets like China.
Total shipments reached 334.3 million units in Q1 2019, down from a peak of nearly 380 million units in Q4 2017 and marks the sixth consecutive quarter where the market shipped fewer than 360 million units. However, this is still considerably higher than figures of two years ago, when total annual shipments were an estimated 1.5 billion units during 2017— approximately 441 million fewer smartphones are being sold compared to 2017 levels.
Within the market for Android devices specifically, vendors shipped 287.7 million units during Q1 2019— down 12% from 327 million Android phones shipped a year ago and representing 85% share of all smartphones shipped in that period. On top of this decline, iOS remained relatively flat at 36.9 million iPhones shipped (11% decline). Other operating systems combined accounted for less than 1%. Shipments for Windows Phone decreased more dramatically with a 93% decline compared to Q1 2018 levels and are no longer considered significant for market analysis purposes by IDC.
This slowdown can largely be attributed to weak customer demand and rising pricing due to component shortages or currency fluctuations across markets such as Argentina or India —key components like memory are expensive due to supply constraints which prevents device vendors from competing on pricing across segments like entry-level or mid-range devices.
Smartphone Shipments Declined 8.9% in the First Quarter as Global Demand Softens, According to IDC
According to IDC, smartphone shipments declined 8.9% in the first quarter as global demand softened. This can be attributed to various factors, including the uncertainty around the coronavirus pandemic, weakened consumer confidence, and a decrease in demand in certain markets.
In this article, we will dive deeper into the causes of the decline in smartphone shipments.
Economic Factors
Economic factors have helped to contribute to the 8.9% decline in smartphone shipments during the first quarter of 2019. The general suspension of global economic growth has played a major role in the decreased demand for smartphones worldwide. For example, in many countries, currency devaluation has decreased consumer disposable incomes, directly impacting their propensity and ability to purchase new phones.
In addition, increased trade tensions between China and the United States have had ripple effects on economies across the globe and particularly on tech giants such as Huawei which recently saw U.S.-imposed export restrictions disallow access to critical parts for their newest handset models. With such upheaval creating consumer uncertainty and market volatility, it is understandable that demand for smartphones may not be able to match up with previous levels due to weaker purchasing power overall.
Furthermore, oversupply appears to be another factor installing global demand for phones; with fewer innovative attributes and improvements being offered on new models compared with recent years, consumers are not seeing enough value or benefit from these upgrades — driving users towards holding off on buying new devices altogether or opting instead for older refurbished models at an increasingly cheapened rate.
Political Factors
Political factors can cause a decline in smartphone shipments when governments enact protectionist trade measures or restrictions on imports/exports. Certain countries and regions also have more rigorous standards regarding technological approval and testing before allowing a device to be sold on the market, which can lead to delays in the smartphone supply chain. Additionally, national security concerns over foreign-made devices can contribute to continuous drops in demand.
Overall, the uncertain global economic climate has directly impacted decision making for smartphone manufacturers and consumers alike, with some turning to cheaper Chinese-made smartphones or refraining from purchasing new handsets. Policymakers have responded by introducing initiatives such as free phones for low-income households or subsidies for renewable energy research efforts, which can weaken demand for smartphones.
Technological Factors
Throughout the development of smartphone technology, there has been a notable level of continued innovation. And as the smartphone market in developed countries becomes increasingly saturated due to high ownership rates, manufacturers have sought ways to differentiate their devices further. As a result, companies have driven major changes with each product cycle and this trend has contributed significantly to the slowdown in sales for these products. Technological factors that might contribute to this trend include advancements resulting in longer device life cycles, reduced dependence on hardware upgrades for experience optimization, and saturation of the high-end segment.
In addition, demand for tech-centric products has slowed worldwide due to a lack of excitement from potential customers regarding current device releases. Companies continue to invest heavily into research and development dedicated to creating breakthrough features that can compel consumers to upgrade their devices frequently — yet without discovering fresh use cases or infrastructures better suited for smartphones’ success in new markets, growth remains stagnated. The inability of companies to meet premium cost expectations while still delivering unique features at extremely competitive pricing remains an obstacle towards achieving wider acceptance at lower price points within emerging markets, further hindering global smartphone shipments.
Impact of the Decline in Smartphone Shipments
The decline in smartphone shipments by 8.9% in the first quarter of 2020 has had a major impact on global demand. According to a report released by IDC, this is the largest year-over-year decline since the first quarter of 2009.
This drop in demand has affected the entire smartphone industry, both in terms of the economics of the companies involved, as well as the end-user experience of the consumer.
Let’s take a look at the impact of this decline.
Impact on Smartphone Manufacturers
The global smartphone shipments saw an 8.9% year-on-year decline in the first quarter, with 292.7 million units shipped. This trend presents a significant challenge for smartphone manufacturers who must adjust their strategies to cope with declining demand.
The largest market for smartphones – China, USA and India – showed signs of weakening demand and slower growth rates, with China being hit the hardest due to saturation in the market and increasing tariffs from the US/China trade war. As a result, Huawei, Oppo and other brands associated with growth in China have seen their shipments drop significantly from last year.
In the USA, Apple continues to be successful with its iPhone range despite declining overall market share amongst US carriers due to growing competition from Samsung whose products have become more competitively priced and attractive over time. However, while Apple does have satisfactory performance in certain regions of Europe (Germany) such as Italy and France that were traditionally strong markets for iPhones, overall weakening demand impacts its performance negatively compared to other regions.
India’s market seems to be slowing down after several quarters of growth due to local players focusing on low-end feature phones rather than mid-range or flagship smartphones – impacting both Apple’s and Samsung’s bottom lines significantly. Therefore it is no surprise that Xiaomi has capitalised on this change in consumer behaviour by becoming India’s largest smartphone maker during this period.
Looking forward into 2020’s second quarter and beyond, it is likely that there will be further pressure on global smartphone shipments over the remainder of the year which could drive several interesting product changes from manufacturers competing in multiple markets – whether through product design or operating system updates – as they continue trying to differentiate themselves ahead of their rivals while also profiting from their margins sufficiently enough so they may weather this industry wide downturn in sales more comfortably than expected initially when trading resumed post Q1 2020 figures were first revealed at end of April 2020.
Impact on Consumers
The decline in smartphone shipments has had a significant impact on consumers as well. This decline has caused a decrease in the availability of new and innovative products, as well as the prices of existing products. In addition, as less smartphones are purchased, manufacturers are forced to cut costs by reducing production, leading to fewer and less technologically advanced devices.
For consumers, the effects of this decline mean spending more money for less features. Smartphones can no longer be purchased at low price points, forcing individuals with lower incomes and students to stick with their outdated devices or buy refurbished devices rather than being able to afford newer ones. Additionally, since fewer smartphones are shipped every year, there is a considerably smaller selection of new products for people to choose from when making their purchase decision.
tags = Worldwide Quarterly Mobile Phone Tracker, Top Smartphone, Xiaomi, Samsung, Apple, oppo, Vivo, idc apple 90.1m iphones q1 idcleswingcnbc
