Smartphone sales are about to contract. According to a new report, the mobile phone market is entering a phase of recession. This drop in sales is in particular the result of inflation, which has reached a record level, the shortage of chips and the various confinements decreed in China.
The International Data Corporation (IDC), a renowned analysis firm, has just published its new report on the smartphone market. Based on the data collected, the experts expect a 3.5% drop in sales during the year. Only 1.31 billion phones will be sold worldwide, estimates IDC. For its part, Strategy Analytics, worldwide smartphone sales will contract by 2%. All brands will be affected.
To justify its projections, the analysis firm points the finger inflation, which is reaching record levels. The inflation rate in the euro zone stood at 8.1% over one year. In the United States, inflation has reached a record rate for 40 years, rising by 6.6% in one year. The loss of purchasing power is likely to reduce demand for new smartphones.
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Lockdowns in China reduce smartphone sales
“The smartphone industry is facing growing headwinds on many fronts – weakening demand, inflation, lingering geopolitical tensions and lingering supply chain constraints”details Nabila Popal, director of research at IDC, referring in particular to the war in Ukraine, which is bogged down despite negotiations with Russia.
For IDC, these are mainly production issues that will hurt the mobile phone market. The confinements decreed by China have paralyzed several factories in the Shanghai region. Several Apple suppliers, such as Pegatron and Foxconn, were forced to close their factories for several days. The production of the iPhone recorded significant disruptions.
“The lockdowns have hit global demand and supply simultaneously by reducing demand in the world’s largest market (Editor’s note: China) and tightening the bottleneck of an already fragile supply chain”, continues IDC. The confinements decreed by the Chinese authorities also add to the shortage of computer chips.
Since the Covid-19 crisis, semiconductor production lines have not ceased to bog down. Despite the opening of new factories, manufacturers are still unable to meet demand from brands. IDC, however, estimates that “ongoing semiconductor supply issues will ease in the second half of 2022”.
Faced with this declining market, smartphone manufacturers are reviewing their sales targets down for the year 2022. A few days ago, a leak announced that Apple expects to sell 20 million fewer iPhones than expected. Despite the arrival of the iPhone 14 within a few months, the Cupertino group has warned its suppliers of very cautious sales projections.
However, IDC assures that Apple remains the smartphone supplier least affected by the measures taken against Covid-19 in China. The firm benefits “greater control over its supply chain”. The report also notes that Apple customers are less affected by the loss of purchasing power which results from inflation.
Samsung made a similar decision. The South Korean group, market leader, intends to reduce its annual estimates by 10%, with a target now set at 270 million units sold against 300 million previously.
A strong comeback from 2023
The IDC report is more optimistic for next year. According to the analyst firm, the recession in the telephony market promises to be short-lived. The market should rebound from 2023 taking advantage of the end of the shortage of computer chips. Sales are expected to climb 5% globally next year, driven in part by strong demand for 5G-enabled smartphones.
“5G device sales are expected to increase 25.5% year-over-year in 2022 and account for 53% of new shipments with nearly 700 million units”, prophesies IDC. In this field, brands like Apple and Samsung take the lion’s share. The rise of 5G was notably caused by the first compatible iPhones, the iPhone 12. The success of the range, and of the iPhone 13, contributed to the population of the 4G successor.
