IDC Predicts Low Smartphone Shipments on Coronavirus Impacts

Zacks Equity Research

For the past few months, the world has been dealing with adverse domino-effects of the coronavirus outbreak. The pandemic that originated in China’s Wuhan, hit the smartphone industry hard, which was looking at a promising 2020 toward the end of 2019. Supply-chain halts have adversely impacted major smartphone makers, such as Apple AAPL and Samsung.

Notably, the global smartphone market has endured setbacks over the last three years. Economic volatility in the global market due to the Sino-US trade tension has been a key threat to smartphone growth. With China being the largest smartphone market in the world, a lull in its domain has affected global growth significantly.

Moreover, consumer spending has contracted drastically, worldwide, due to coronavirus outbreak. Taking this into account, recently, IDC forecasted a 12% fall in global smartphone shipments to just 1.2 billion units in 2020. The research firm also noted that smartphone shipments are not likely to return to growth until the first quarter of 2021.

This outlook comes after a dismal preliminary data from the IDC Worldwide Quarterly Mobile Phone Tracker released on Apr 30, which showed an 11.7% year-over-year decrease in the first quarter of 2020 in worldwide smartphone shipments. This was also the largest year-over-year decline ever for the smartphone industry.

Notably, in April this year, research firm TrendForce had said that the global smartphone production is likely to decline 16.5% year over year in the June quarter.

China, the largest market for smartphones, is likely to continue to be affected by the coronavirus. Also, the hard-hit countries like Italy and Spain are poised to cause a double-digit decline in smartphone shipments in Europe this year, per IDC.

Apple And Samsung Bear The Brunt

Apple, in its March quarter, witnessed a 6.7% decrease in iPhone sales. Both demand and supply were negatively impacted by the outbreak of coronavirus.

Apple had to shut its stores in the United States and Europe following the outbreak, promoted the iPhone 11 at discounted rates in China and released a new low-price SE model to survive a drop in global smartphone demand.

Moreover, Apple’s high-priced smartphones are losing market traction to Xiaomi's significantly lower-priced devices offering similar features. Apple’s share in the global smartphone market fell from 18% in fourth-quarter 2019 to 14% in first-quarter 2020, per Counterpoint Research.

Further, Apple is now also expected to defer the launch of its first 5G-supported iPhone device. The delay can be attributed to supply-chain constraints as well as anticipations of sluggish demand in the wake of the significant coronavirus impact on the economy.

Notably, this Zacks Rank #2 (Buy) stock has been ramping up its hiring efforts from Intel INTC and Qualcomm QCOM to work on 5G modems. Further, beginning 2021, all iPhone models are expected to support 5G. Qualcomm and Broadcom AVGO are anticipated to supply 5G modems and RF power amplifiers, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Additionally, per Gartner, Samsung, Huawei and Oppo recorded the worst performances among the top five smartphone vendors in the first quarter of 2020.

Year-To-Date Price Performance

Silver Lining

Nonetheless, the research firm also showed us a silver lining for the industry in the form of 5G, which is expected to be instrumental in the worldwide smartphone market recovery in 2021. Also, with the easing of lockdowns in most parts of the world, supply-chain disruptions are starting to tone down. IDC also expects the top vendors in Europe to maintain their market shares, driven by higher flagship launches and a strengthening e-commerce industry.

Moreover, with the reopening of factory operations, shipments from China's factories to vendors grew 17% year over year in April, hinting at a rebound in domestic demand.

Alphabet’s GOOGL Google, which currently carries a Zacks Rank #3 (Hold), forayed into the smartphone space much later compared with peers like Apple and Samsung. Nonetheless, the company’s innovative skills, robust voice assistant along with the much-preferred Android operating system worldwide will steadily aid its Pixel phones’ advancement.

By beefing up its product portfolio with the launch of Pixel smartphones, the company is rapidly penetrating the smartphone market.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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