Smartphones have been an essential part of human life in the pre-covid time. But the onset of the global pandemic has dramatically changed human priorities. The demand for luxury products such as smartphones, fancy jewelry, fashion apparels, watches, automobiles and makeup accessories has taken a backseat. On the contrary, essential items such as foodgrains, pulses, spices, snacks, dairy products and toilet paper have seen an unprecedented surge in consumer demand. The ability of smartphone manufacturers and retailers to clear their inventory in the absence of easy transport systems and stringent social distancing norms in shops is evident.
Analysts explain that when Coronavirus had affected China, the smartphone manufacturers were concerned about meeting the global demand. But with the onset of global crisis, though manufacturing in China has resumed, the demand is not enough to sustain the business. The consumers are acting more conscious and therefore replacement cycles are going to last longer.
As per research conducted by TrendForce, the global smartphone production has reduced by nearly 10% in the first quarter of 2020 due to the ongoing Corona crisis. When one analyses the top three vendors, Samsung, Huawei and Apple still retain the top three spots with Apple seeing minimal decline in shipments for March on an annual basis. As per Counterpoint Research, the Indian smartphone industry is expected to report $2 billion in losses due to the Covid-19 pandemic. The smartphone shipment is expected to decline by at least 3% this year in comparison to the previous year. To further add to smartphone makers woes, mobile phones were not listed in online sales as they were not included in essential items category by the government of India.
Covid Management Strategies Adopted by Smartphone Companies
The response of various smartphone companies to the global pandemic has been variable. Some manufacturers such as Samsung have cut down on prices of their phone models in growing Asian markets such as India in an effort to boost sales. Others have postponed the launch of various phone models amidst strict lockdown being practiced in emerging markets.
Samsung is expected to notice a reduced growth this year due to competition from Chinese brands in the Southeast Asian and Indian markets.
The second largest player Huawei is seeing a decline due to exclusion of its new devices from Google Mobile Services. The company is focusing on the sales of 5G smartphones this year.
The third largest player Apple has also been devastated due to loss in device production numbers earlier this year. The company has launched lower priced versions iphone SE to attract consumers. But reduced tendency of consumers to spend due to global pandemic is likely to take a toll on Apple’s profits.
Xiaomi has been largely unaffected with regards to its production capacity in the first quarter of 2020 which has created surplus inventory that was expected to be sold overseas. However, the tables upturned and now the Chinese phone maker may have to sell its units at low gross margins in China to make up for downfall in overseas sales and also capture a higher market share of the Chinese smartphone sector.
The future strategy of the smartphone makers will largely depend on the containment of the pandemic and revival of consumer demand in the emerging markets. Though the companies may launch newer 5G models in 2020 and 2021, a lot will depend on the creation of 5G network infrastructure in these markets amidst challenges posed by the current Covid-19 crisis.
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