Forecasting Challenges of 2020

The “new normal”. Unprecedented. Uncertain and challenging times. These, as we know all too well now, are some of the phrases used to paint a picture of what life looked like in 2020. They have turned into cliches, making some people cringe. But what these words really mean is that 2020 has been the most unusual year many of us have experienced and worked through.

This has certainly been the most difficult year, yet also the most interesting and intellectually challenging one in my 13 years as a market forecaster. Looking back, I’m amazed (and chuffed) to see that by the end of March we got most of our assumptions relatively right.

Let’s look at the largest consumer electronics market in the world, mobile phones, on which we naturally focussed this year. We reviewed our forecast for global shipments eight times over the course of 2020, compared with four times in a normal year. Yet for the past nine months our projections have remained within a very small range from the number we published in late March.

One of the reasons why this year’s events came as a shock to the system is that we didn’t see them coming. OK, Bill Gates and many scientists warned of a pandemic as a highly likely event, but no one could have put a date on it. And the other reason is that the disruption came faster than a bullet train. The first official report of a new disease causing pneumonia came from China on 31 December 2019; by the end of February 2020, it was clear that the novel coronavirus was spreading worldwide.

Our first revised forecast was published on 12 February 2020, slashing our expectations for worldwide sales of mobile phones by 6% from our September 2019 numbers. Another downward revision of a further 5% followed four weeks later, when it became clear that the virus wouldn’t be contained in China. On 23 March 2020, which happened to be when the UK entered a lockdown, we lowered our forecast by another 5%.

Since then, however, the forecast has been fluctuating from the level of 23 March by less than 2% (see Figure 1). Yes, under the surface, there have been spills from one quarter to the next, and some markets recovered faster than others, but the overall projection for the year remained remarkably stable.

Figure 1. Chart showing global shipments of mobile phones in 2020: comparison between all forecast revisions

How did we achieve such stability in the turmoil of 2020? We spent our days early in the year spreading into areas beyond our typical reach. We followed scientific news, daily press conferences from the World Health Organization, and kept tabs on the number of Covid-19 cases and deaths from all countries in the world on a daily basis, looking for patterns in the numbers.

We read up on political news from around the globe, looking for clues into how quickly and how decisively different governments would react and suppress economic and social life, and how they would keep their economies from collapse. We closely followed macroeconomic forecasters and dissected their assumptions. We monitored data about the use of public transport, air freight services, a broad basket of consumer goods, online shopping and more. And let’s not forget the global community of data-lovers, who openly shared lots of information, hypotheses, questions and insights for everyone’s benefit.

What’s clear with hindsight is that the forecasts started to stabilize once we dispersed the initial chaos by gathering enough — not necessarily perfect — knowledge and formulated the first reasonable, if risky, assumptions.

Young markets were more difficult to call than the mature mobile phone market. Smartwatches seem to be slightly outperforming our expectations, as people focussed on fitness and well-being this year. Extended reality devices fell just short, mostly owing to supply constraints and slow product development. The one tech segment that came up trumps, beating probably everyone’s expectations — ours included — is 5G, despite the fact that CCS Insight’s short- and long-term projections for adoption remain above the consensus.

Looking forward to 2021, we don’t expect such big swings in forecasts as we did early in 2020, but the uncertainty remains high. The global roll-out of vaccines for Covid-19 brings hope, but macroeconomic forecasts remain cautious and, for the moment, only expect solid economic recovery in most countries sometime in 2022.

Assuming no further lockdowns beyond this winter, we’ll be swimming in the somewhat familiar waters of economic recovery in the rest of 2021. But this economic crisis is unlike any other we’ve seen before, affecting all countries and somewhat unusual sectors of the economy. It hits low-income jobs disproportionally, although it’s fought by atypical and determined measures by all governments and international institutions.

We will aim to draw as much comparison as possible with the financial crisis of 2008-2009, but parallels should be interpreted carefully. One thing we’re certain of is that the disruption in 2020-2021 is truly like no other. Historic data is therefore less useful at the moment, particularly in dynamic tech markets, where a decade is a whole era — tech markets are in a very different place now than they were in 2008.

So the key for us in the next 12 months will be a big focus on macroeconomic indicators. But above all, we’ll keep talking to people in our industry and beyond, tuning in to spot early signals of improvement from different economic sectors and geographic markets.

We very much welcome you to become part of this conversation! To get the ball rolling, if you’re wondering how many mobile phones we expect to be sold in 2021, the answer at the moment is 1.77 billion.

I’m sure the day will come when all forecasts are made by machines, with people just checking the final result to ensure it makes sense. But looking back at the “unprecedented”, “challenging and uncertain times” of 2020, I’m also sure that day has yet to come.