The Coronavirus outbreak in China has had a broad impact on the tech industry globally, so much so that smartphone sales are expected to fall 10.6 percent year-on-year (YoY) in the first half of 2020. Although the market is anticipated to make up ground in the second half, research firm IDC is predicting a 2.3-percent YoY decline in smartphone shipments this year due to coronavirus.
IDC says shipment volume is likely to hover around 1.3 billion. The figure for last year stood at 1.41 billion, down one percent from 1.43 billion in 2018. The market was expected to recover this year driven by advancements in 5G.
However, uncertainties around Coronavirus have had a negative impact on the global smartphone market. A prolonged shutdown of factories in China and consequent disruption in the supply chain has resulted in a rapid slowdown.
Although factories are slowly resuming production, it’s going to take some time before they return to normal operations. The IDC report suggests that small and medium enterprises in the phone industry, especially retail channel partners, will be affected the most.
“Component shortages, factory shutdowns, quarantine mandates, logistics, and travel restrictions will create hindrances for smartphone vendors to produce handsets and roll out new devices,” said Sangeetika Srivastava, senior research analyst at IDC.
The period between February and March is the time when several market leaders release their flagship products. That is already being affected by the Coronavirus outbreak. Samsung is blaming the virus for terrible sales numbers of its Galaxy S20 series.
Smartphone shipments will likely exhibit a fast recovery from the second half of the year when the “coronavirus situation hopefully improves and 5G plans pick up the pace globally”. Actual sales, however, may not entirely get back on track until 2021.
Chinese market hit the most
The Coronavirus epidemic started in the Wuhan city of China, and the country has unsurprisingly suffered the most. IDC forecasts the Chinese smartphone market to drop by nearly 40-percent YoY in the first quarter of 2020. The market will recover slightly in subsequent quarters but still may not reach last year’s levels.
IDC is expecting a multi-quarter growth for the industry in China as workers gradually return to factories. The Chinese government may intervene with subsidies and incentives to help improve the situation. The country’s demand shock still extends several quarters.
The coronavirus outbreak may also result in a permanent shift in customer’s buying behaviors in China. In order to avoid the crowd, customers will prefer buying from online channels.
While online sales will account for a significantly increased share of phones sold in the first half of 2020, IDC expects this behavior to grow into a trend in the long term.