Pandemic clouds smartphone sales as life goes immobile
Smartphone sales could take an especially strong hit this year as people cut spending and travel less and focus scarce resources on other types of technology.
Why it matters: Smartphones provide a huge chunk of industry revenue because hundreds of millions are sold each year. It's a key business not just for phonemakers like Apple and Samsung, but also for component suppliers like Corning and chipmakers like Qualcomm.
In an updated forecast last week. the Consumer Technology Association said it expects between 138 million and 153 million smartphones to be sold in the U.S. this year. That represents a drop of as much as 15% from last year. In January, the group had seen this year's smartphone sales rising 2%, to 166 million units.
Between the lines: A number of factors explain the expected dip, including:
- Overall consumer spending is slowing. People are losing jobs and those still employed are also tightening their spending.
- People are putting scarce resources elsewhere. Other tech gear, including laptops, monitors and even the oft-maligned desktop computer, suddenly seem like bigger priorities, along with home-office devices and wireless equipment.
- There are fewer reasons to upgrade. Some people buy a new phone because they break their device, lose it or have it stolen. All these things are happening less often. And who needs a better camera when you barely leave the house?
- Upgrade cycles had already been lengthening before the crisis hit, as customers hung on to their old smartphones longer with the disappearance of carrier subsidies and the steady rise of high-end phone prices.
Yes, but: None of this has stopped a flurry of smartphone launches even during a time when most Americans were sheltered at home.
- Apple launched the iPhone SE, probably the phone with the broadest appeal given it offers those who do want a new phone a lower-cost option.
- Motorola and OnePlus both offered up new high-end models earlier this month. Going upscale was already a challenge for both brands, despite their reputation for quality phones. With COVID-19 dampening demand, it could prove even tougher.
- Samsung managed to get in one of the last in-person launches with a San Francisco event in February to unveil the Galaxy S20 family. However, by the time the phone was available for sale in early March, the coronavirus was already starting to close stores.
What's next: Question marks surround the fall lineup, with much of the speculation centered around Apple.
- The most recent report, in Monday's Wall Street Journal, suggests Apple is still on track to deliver several new iPhone models, though they could come a month or so later than in the past.
- Google is also expected to deliver new Pixel models. A lower cost version of the latest Pixel, likely the 4a, could come soon, while Google had been expected to launch a new flagship model in the fall.
- Samsung typically updates its Note family in the fall and has continued to do so even as the Galaxy S line has absorbed many of the features once limited to the Note line. It would be a surprise if Samsung didn't do so this fall, coronavirus or not.
What they're saying:
- NPD analyst Stephen Baker said that the market faces a "perfect storm" with smartphones already slowing heading into the year, and now people going out less, traveling less and having ready access to better options to watch video. "Mobility is much less important to me in this environment than it has ever been before," Baker said.
- Creative Strategies analyst Carolina Milanesi notes that smartphones remain our most-used devices so sales won't completely fall off a cliff, though some buyers may shift toward mid-range devices. Most at risk are phones built around a gimmick, such as folding devices.