But the outlook for 5G remains upbeat
When life changes as if tectonic plates are moving under our feet, a rare moment of stability is something to acknowledge. This week, we broadly confirmed our projections for the global mobile phone market in 2020, published in April.
We continue to expect mobile phone shipments worldwide to drop 13% to 1.57 billion units, and within that, smartphone shipments to slip 10% to 1.26 billion units. Our expectations for shipments of 5G devices are for 0.21 billion units — that’s 13% of the total market in 2020.
The Market in 1Q20
The forecast review was part of our quarterly analysis of the market in 1Q20, which came very close to our expectations — CCS Insight clients can access the full report here. We estimate that the Covid-19 pandemic pushed global mobile phone shipments down by 16%, to 360 million devices. Smartphone shipments fell 15% year-on-year to 280 million units.
China experienced a 36% fall in total shipments in 1Q20, as it was in lockdown for most of the quarter. Other regions also declined significantly, hurt by supply constraints in part of the quarter, and then by a steep fall in demand in the last weeks of March. Shipments in North America dropped by 16%, and those in Western Europe and Eastern Europe by 15%.
All major manufacturers saw a fall in their mobile phone shipments in 1Q20. Samsung initially appeared shielded from trouble, as it doesn’t make phones in China and doesn’t sell many there either. However, the weakening demand outside China caught up with the market leader: although Samsung was the front runner, shipping 64 million units, these were down 18% year-on-year. Huawei was in second place, having shipped 49 million handsets during the quarter, down 17% year-on-year, despite a very solid market share in China. Apple did well in the quarter: it shipped 40 million phones, down only 7% year-on-year despite facing supply shortages in early March and store closures in different markets at different times during the quarter.
Our Outlook for 2020
With a large proportion of the world’s population in lockdowns of varying severity, 2Q20 will see the steepest collapse in demand in 2020 — or perhaps ever — plunging 30% to 308 million units. The end of the quarter will regain energy as major countries relax some of their restrictions, but the economic uncertainty will remain.
Recent figures from China appear to bring some optimism. Domestic shipments rose 14% year-on-year in April, as some consumers who had delayed their purchase bought a new phone. But this compensation is only partial: for the entire period from January to April, shipments were 20% lower than for the same quarter of 2019.
I’d caution against translating this number directly to other markets. In April, Chinese consumers were still enjoying the positive results of March, when the overall exports from China beat expectations and fell just 6.6%, as the global economy was still going strong. However, when other countries start emerging from lockdowns, the whole word will be faced with a different macroeconomic reality. For example, the Bank of England expects the UK’s GDP to contract by 25% in 2Q20.
Consequently, we expect demand to remain subdued in 3Q20 and 4Q20, with projected declines of 7% and 3% respectively. Our forecast is based on expectations of a significant global economic downturn in 2020 despite the deployment of massive economic stimuli by almost all countries and help from major international institutions. I would stress that an overall fall of just 5% in mobile phone shipments in the second half of 2020 would be a positive outcome, as other sectors of the economy will tank considerably more. Our optimism that the mobile phone market might outperform the economy is based on the fact that people and businesses are in tune with the importance of having reliable devices and connectivity, and therefore many will prioritize mobile phones above other purchases.
But the economic gloom will inevitably scare away demand. Some businesses will close, some consumers will be too cautious and will delay buying a new phone, others simply won’t be able to afford one. Raising another alarm, in the past few days lower macroeconomic forecasts have emerged, which could prompt us to lower our expectations for the mobile phone market in the second half of 2020.
5G Will Revive the Market
Our forecast for shipments of 0.21 billion 5G-enabled phones in 2020 is at the high end of the range of forecasts shared by major industry players. But we’re confident in the potential of 5G and expect it to plough through 2020. China alone will see almost 120 million 5G units sold. In April, 5G accounted for 39% of the shipments there. Intense competition between smartphone-makers vying to make up for lost sales in the first half of 2020 will lead to lower prices, bringing 5G into the sub-$400 segment of the global market in the second half of 2020.
Uncertainty engulfs the world these days, and forecasts tend to change. We believe our current forecast for 2020 is balanced: positive news suggests there’s an upside potential to our forecast, while downgrades of GDP expectations point to a downside potential. We continue to monitor the market very closely and will publish a revised forecast should the expectations change.
The chart below is taken from our Quarterly Market Analysis: Mobile Phones, Worldwide, 1Q20. If you’d like a copy of the report, drop us a line.
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