Smartphone sales and production lagging

Epidemic hits supply chains and sales, while consumers put 5G phones on the backburner

5G on backburner
Young boys play with smartphones. Image: iStock

(ATF) – Smartphone supply chains have been hit by the dramatic slowdown in manufacturing in China due to the outbreak of Covid-19, new data shows.

A report by Trendforce estimated there would be a 13% year-on-year drop in handsets produced this quarter. It said the pre-outbreak forecast was 303 million units, but 270 million units are now expected.

The first quarter of 2020 saw sluggish Lunar New Year sales in the Chinese smartphone market, which has led to excessive stock in the retail outlets.

And with the outbreak spreading to more than 70 countries since the second half of February this has affected the global economy and hit smartphone sales in overseas markets.

TrendForce said it has a relatively conservative outlook for the global smartphone market in the second quarter, with about 318 million units expected to be produced, an increase quarter-on-quarter, but a 7.4% decrease year-on-year.

It anticipates that – assuming the outbreak can be contained by the end of June, the demand for smartphones will go into a noticeable upswing in the second half of this year.

Furthermore, with the release of 5G and multi-camera phones, global smartphone production is expected to reach 1.35 billion units this year – down from a pre-outbreak forecast of 1.41 billion, and a 3.5% decrease year-on-year.

But while the Chinese government has pushed the arrival of 5G phones, it is unclear how budget priorities are being affected by virus control.

Consumers seem to have taken a wait-and-see approach regarding 5G smartphones.

On the other hand, with the epidemic having a considerable impact on the global economy, many people are believed to have held on to disposable income, and thus deferred the demand for 5G.

So, TrendForce revised its 2020 5G smartphone production forecast from 250 million units down to 200 million units, with a 15% penetration rate in the overall smartphone market.