The declining smartphone shipments - is the worst phase over?

(Image credit: Future)

Smartphone sales have plummeted over the first two quarters following global cues around  the Covid-19 pandemic and the resultant lockdown. As against 370 million units shipped in the first two quarters of 2019, the numbers had fallen by one-fifth to 294.7 million in January-June period this year. 

Manufacturers are hoping that the scheduled flagship launches of Apple, OnePlus and a few more could shake up the lethargy, industry insiders believe that recovery may take two more quarters. However, fears of the anti-Chinese sentiment causing a further erosion of sales are proving to be misplaced, given that several new models have hit reached the shop windows with reports of steady sales. 

Predictions galore

In a report published in June, rating agency Fitch predicted that a recovery might only surface in 2021 on the back of higher sales from 5G-enabled smartphones. It had predicted a 15%-17% decline in shipments during 2020, on top of a 4% drop in 2018 and a 2% reduction in 2019. 

Gartner, which had predicted total global smartphone shipments to touch 1.57 billion units through 2020, appears to have adjusted its optimism over the last two quarters. Numbers from the third quarter (July-September) is due soon and could well determine how far off the mark actual numbers would be when 2020 draws to a close in three months time. 

And the reality check

A survey by IDC was even more revealing. Average selling price of smartphones were flat at $161 (Rs.11,000) thus far in 2020 with brands having to jack up prices due to the increase in federal taxes (GST). In fact, during the first two quarters of 2020, it was the sub-$200 devices that saw most sales with an 84% share in the market.  

The US$200-300 segment fell 71.6% year on year, while the mid-premium segment (ranging between $300 to $500, that holds a 4.8% share dropped by 48% with top models such as Samsung’s Galaxy A51 and A71, Vivo’s V19, Apple’s iPhone SE (2020), and the OnePlus 7T on the receiving end.  

Shipments in the premium (above $500) segment dropped by more than 35% with Apple topping the charts followed by Samsung and OnePlus. The iPhone 11 and iPhone XR together accounted for 28% shipments in this segment with Xiaomi's Mi 10 and the OnePlus 8 series as new entrants.

The prevailing realistic view

Industry veterans to whom we spoke believe that there is no way shipments in India could get anywhere close to what the industry expected in January this year. A report from Counterpoint Research proves the point. It said pent-up demand during April and May pushed sales in June to the pre-Covid-19 levels. However, the overall drop during the second quarter was a whopping 51%. 

While online retailers did have some positive news in terms of spreading their wings to smaller cities and towns, Prime Day numbers for Amazon suggests that phones weren't really on top of the mind for buyers. There was a two-fold increase in the number of customer sign-ups and more demand for sub-Rs.15,000 devices

Expectations of a spike during the upcoming holiday (festival) season may not be enough to take the shipments to a reasonable level. However, there would definitely be some traction for some of the upcoming flagships such as the iPhone 12 and the Google Pixel 4a, market analysts say. 

The 5G conundrum

However, the biggest challenge that India could be facing in 2021 relates to the 5G network, which hasn't yet gotten underway. Though several new devices are coming enabled with 5G, the fact that service providers led by Reliance Jio, Vodafone-Idea (Vi) and Airtel are still struggling to upgrade could cause buyers to stop their upgrade plans over the next twelve months, says a fund manager who focuses exclusively on telecom stock, says. 

Having thrown out Huawei following the Indo-China border skirmish in June, the federal government has gone after alternatives, with the latest being their signing up with Japanese companies. The deals were signed between India and Japan as part of a strategic meeting between foreign ministers of the two countries yesterday. Details of the deal on 5G collaboration weren't made available though indications are that Japan is also keen to roll out 5G before the Tokyo Olympics, which was postponed from this year to July 2021. 

As for India's much-hyped Make in India campaign, analysts are quick to point out that the PLI scheme under which the federal government had cleared as many as 16 proposals, is largely meant for growing the export markets. 

With business as usual yet to resume in spite of the relaxations in the lockdown, it remains to be seen whether the upcoming festive season can trigger a revival in smartphone sales. 

Raj Narayan

A media veteran who turned a gadget lover fairly recently. An early adopter of Apple products, Raj has an insatiable curiosity for facts and figures which he puts to use in research. He engages in active sport and retreats to his farm during his spare time.