Brief:
- Smartphone shipments plunged a record 38% to 61.8 million units in February from the prior year as the coronavirus pandemic disrupted supply chains and reduced consumer demand. China was hit especially hard as demand collapsed, per an announcement by Strategy Analytics.
- Because of the pandemic, several factories in Asia were unable to make smartphones, and many consumers weren't willing or able to visit stores and buy new devices. Despite signs of a rebound this month, demand is forecast to remain weak as the coronavirus spreads in North America, Europe and other regions, per Strategy Analytics.
- "The smartphone industry will have to work harder than ever to lift sales in the coming weeks, such as online flash sales or generous discounts on bundling with hot products like smartwatches," Yiwen Wu, senior analyst at Strategy Analytics, said in the announcement.
Insight:
The coronavirus pandemic has been profoundly disruptive for smartphone makers that depend on factories in Asia for components and assembly, while also preventing consumers from visiting stores to check out new models of phones. Smartphone makers have been among the first companies to feel the devastating effects of the pandemic, which last month led the GSM Association to cancel Mobile World Congress (MWC) — the world's biggest exhibition for the mobile industry — for the first time. The cancellation left many companies scrambling to find other ways to showcase their wares to cellular companies, electronics retailers and the press.
Samsung, the world's biggest maker of smartphones, felt the negative effects of the coronavirus despite efforts to diversify its supply chain among other countries, including Vietnam and India. The dramatic drop in demand in China foretells of a similar decrease in the U.S. as the pandemic spreads, The Wall Street Journal reported. Apple, which last year had stopped reporting sales figures for the iPhone, already has warned that it won't meet its sales goals for the current quarter because of the outbreak. The tech giant closed its retail stores in the country, limiting the ability to make new sales of its products. It also faced delays in the resumption of factory output after the Lunar New Year holiday, the Journal reported. Apple will provide more details about its sales projections when it reports quarterly results, most likely on May 5.
The COVID-19 pandemic also will negatively affect shipments for augmented reality (AR) and virtual reality (VR) headsets that share supply chains with smartphones, per a forecast by International Data Corp. (IDC). The researcher this week estimated that shipments will fall 11% in Q1 and 24% in Q2 from a year earlier. However, demand is expected to pick up during the crucial holiday season, which also is a key selling period for smartphones.
