Poor First-Quarter Results Foreshadow Challenging Year for Smartphones

on May 1, 2020

At IDC, we released our preliminary 1Q20 smartphone shipment results this week, and they weren’t pretty, with units down 11.7% from the year-ago quarter, reaching just 275.8 million units. That number represents the most significant year-over-year drop we have measured in the market. Unfortunately, things are likely to get worse before they get better, as consumers tighten their spending in the face of continued economic hardship—including massive job losses—and ongoing COVID-19 concerns.

Top Five Vendors
Our prelim numbers put Samsung at the top of the market, with more than 58 million smartphones shipped during the quarter. While the company grabbed better than 21% of the market for the quarter, its volume still represented a nearly 19% year-over-year drop. As Carolina recently noted, Samsung has worked hard to grow its share of the mid-range market with its A-series phones. That line sold well in the first quarter and should serve the company well in a tighter economic environment.

Huawei grabbed the number two spot with a 17.8% share of the worldwide market, on volumes of about 49 million units. That represented a 17.1% decline year over year. The company moves a significant quantity of phones in China, which was the first country to be hammered by COVID-19, which impacted its overall volumes. The fact that the country is also out front in terms of emerging from initial lockdowns could give boost Huawei’s fortunes through the rest of the year.

We estimated Apple’s volumes at 36.7 million phones for a third-place spot with a 13.3% share. That represented a less-than-1% drop from the year-ago quarter. Apple also announced earnings on the same day, noting overall revenue growth during the quarter was up by 1%, and iPhone revenue was $29B, down from $31B a year ago. As I wrote a few weeks back, Apple’s fortuitously timed launch of the iPhone SE could position it well during the coming challenging months.

Rounding out the top five were Xiaomi, which grabbed a 10.7% worldwide share with 29.5 million units shipped on year-over-year growth of 6.1%, and Vivo, which grabbed 9% with 7% year-over-year growth. Both companies saw substantial volumes in India in the first quarter and will be negatively impacted looking forward due to the full lockdown happening there.

China’s Rebound, Plus 5G
At IDC, we are taking the unusual step of working on a prelim forecast well ahead of our regular quarterly cadence because our clients are seeking guidance in this challenging environment. It is no easy task forecasting right now with such a high level of uncertainty, and frankly, it is not looking great for the rest of this year. One thing worth noting, however, is that our analysts in China believe the fact that it was the first country to emerge from lockdowns could mean it’s the first to see some light at the end of the tunnel in terms of shipment volume declines. At present, they believe China could even see some growth by the end of the year.

It is an interesting perspective, and it made me think about something that the executives at Qualcomm said during its recent earnings call. While the company is forecasting total worldwide handset shipments to drop by 30% in the June quarter versus its pre-COVID-19 forecast, it did not change its outlook for 5G shipments. It currently believes 5G shipments will hit 175-225 million units during the year. In other words, it now expects the mix of 5G phones to be higher than in its pre-pandemic forecasts. A big part of that bet is on China, where the company said it exited the first quarter with 30% of devices shipped into the channel offering 5G. The company also noted that 71% of all new launch models carried 5G.

Qualcomm’s 5G number seems very aggressive, but the fact it did not back away from it this week seems to suggest they have strong reason to believe they can still hit it, and China will be a key driver there. I am very curious to watch how subsequent 5G launches happen here in the United States, especially as additional lower-cost options appear. As the COVID-19 crisis continues to play out here, it is unclear how many people will be ready to spend money on a new smartphone in the current quarter and the second half of the year. And it could be an especially challenging year for anticipated high-end 5G phones.