Smartphone sales revival expected in Q4
A new report by the IDC (International Data Corporation) says the mobile phone industry will recover, following a global slump in sales due to low spending during the pandemic.
Smartphone shipments are forecast to increase by 2.4% year over year in 4Q20, followed by 4.4% year-over-year growth in 2021. The market recovery will be driven by a fast supply chain recovery as well as significant incentives from both OEMs (Original Equipment Manufacturers) and channels on new 5G products. The IDC predicts the global market will expand each year through to 2024 with a five-year compound annual growth rate (CAGR) of 1.3%.
Ryan Reith, programme vice president with IDC's Worldwide Mobile Device Trackers said, "Despite concerns around weakness in 5G demand, smartphone volumes exceeded the forecast in 3Q20 and supply-side momentum headed into the holiday quarter and 2021 remains strong.”
He continued, “We've come to the conclusion that despite on-going lockdowns and economic concerns, consumers in many markets around the world have shifted their normal spending from things like travel, dining out, and general leisure to things like consumer electronics. Smartphones happen to be a benefactor of this transition.”
Chinese market
However, the market recovery in China has been slower than expected because of a smaller than anticipated demand for 5G. According to IDC data, the major brands in China have shifted most of their smartphone portfolios to 5G leaving consumers with fewer options.
As a result, IDC predicts sales prices in China to increase by 11.4% year over year in 2020. However, rising ASPs (anticipated sales prices) combined with smaller than anticipated demand may create market challenges, resulting in regional shipments falling by 11.4% in 2020.
Meanwhile, developed markets including North America, Western Europe, and Japan, are all expected to see year-over-year growth in the holiday quarter driven by strong seasonal promotions and lucrative shopping days such as Cyber Monday.
The IDC report states that 5G is a driving force, with 5G smartphone shipments expected to reach 10% of global volume in 2020 and grow to 29% in 2024. Despite concerns about the lack of demand for 5G, the transition to the new technology is in motion.
But providers will need to create incentives, like making sure the cost of 5G hardware is on a par with 4G phones. The IDC, therefore, expects global 5G ASPs to fall 25% year over year in 2020 to an average $611 and then to $453 in 2024.
Sangeetika Srivastava, a senior analyst with IDC's Worldwide Mobile Device Trackers, explained, “Competitive pricing will play an integral role in shaping 5G development. The COVID-19 crisis has influenced consumer behaviour by tilting it toward more budget-friendly devices and narrowing the spend for essentials only.”
She added, “Aggressive promotions and more affordable 5G devices from major smartphone vendors are expected to partially offset the impact in the near term.”
