Mobile Phone Market Will Fall 13% in 2020

Forecast projects a return to growth in 2021 and 2022

The mobile industry is facing a rough ride in 2020, but its future remains bright, and this is reflected in our recently published market forecast. Below we outline the main learnings. CCS Insight clients can access the full material here.

Global demand for mobile phones in 2020 will be almost a quarter of a billion units lower than that in 2019, a drop of 13%. We expect that only 1.57 billion mobile phones will be sold worldwide in 2020, the lowest number in a decade, with smartphones reaching just 1.26 billion units, down from 1.41 billion in 2019.

The global outbreak of Covid-19 will stifle mobile phone sales in 2020 in three ways:

  • Disruption to normal life will dampen demand from consumers and businesses.
  • The slowdown in supply chains will hinder mobile phone manufacturing and distribution.
  • The impact on the global economy will continue even after the outbreak is over.

Data from China gives us a good indication of the effect that lockdowns and consumer uncertainty have on demand for phones. In January and February 2020, sales volume fell 44% from the same period in 2019. And early data from other countries that have introduced strict measures to fight the pandemic points to similar declines.

But while China is slowly emerging from the disruption to everyday life, the rest of the world is just starting to feel the impact. Demand for mobile phones in these markets will be very weak over next few months, as people stay at home, shops are closed and the uncertainty for families and businesses is high. We therefore expect global sales of mobile phones in the second quarter of 2020 to be 29% lower than those in the second quarter of 2019.

In addition, the disruption to the supply chain for mobile phones in China led to shortages of some products in March. Although manufacturing in the country is ramping up and returning to normal levels, operations in other territories such as India are now on hold. Transporting goods is also proving tricky. As a result, some companies are now having to deal with being unable to meet demand for certain products. This is particularly painful because they have only a short window of opportunity before people and businesses switch strictly into money-saving mode. In the aftermath of the current situation, we expect the biggest detrimental impact on sales will come from soft demand.

In the second half of 2020, when life returns to a new normal, we expect appetite for mobile phones to remain subdued, as a weak macroeconomic environment will see many consumers and businesses delay new purchases and upgrades of existing mobile phones. Even as the situation improves, the traditionally strong Christmas quarter is expected to deliver 3% lower sales this year than in 2019.

However, one thing that’s clear is that connectivity and smart devices have remained extremely valuable to people and businesses in these difficult times, allowing them to continue working, studying and staying in touch. We believe this high value placed on mobile phones will help the market bounce back quickly, as long as the macroeconomic situation improves.

Positively, we expect demand for mobile phones to grow by 12% in 2021, almost reaching the levels seen in 2019, with smartphones sales outpacing 2019 by a good 4%. Even better, in 2022, as the economy recovers, delayed purchases will deliver another boom: 13% growth to almost 2 billion phones.

A shining star in the market is 5G, the latest generation of mobile technology that is delivering faster speeds and more capacity than 4G. In January 2020, 5G-enabled mobile phones accounted for more than one in four phones sold in the otherwise weak market in China. Phone-makers are stepping up their efforts to bring 5G to more-affordable pricing levels, and we expect this behaviour to accelerate in the second half of 2020. In an effort to offset the weakness in the first half of the year, we believe phone-makers will do everything they can to grab a piece of the shrinking smartphone pie by offering advanced capabilities like 5G at the punchiest prices possible.

In 2020, we forecast that 5G-enabled phones will reach sales of 210 million units, a tenfold increase compared with 2019, with about half of the volume coming from China. In 2024, sales of 5G phones are projected to hit 1.15 billion units, accounting for 58% of all mobile phones sold that year.

The chart below, taken from our forecast, shows shipments of mobile phones worldwide and yearly growth rate from 2011 to 2024. For more information, e-mail us at info@ccsinsight.com.

Click on the image above for a larger version.

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