Coronavirus outbreak to result in huge reduction in smartphone manufacturing

The coronavirus outbreak is expected to lead to a huge reduction in the production of smartphones, potentially falling by as much as 30% in the first half of 2020, according to ABI Research.

“The ripples from China will be felt globally,” says David McQueen, 5G Devices research director at the research group.

With China located at the epicenter of the COVID-19 outbreak, the resultant impact has been disastrous for the global mobile device market, which has subsequently witnessed mass disruption to its production lines and a stalling of related supply chains caused by labor shortages and inactive logistics, he adds. As China is also the world’s manufacturing center for most of these device types, and one of its biggest markets, the sector has been hit hardest by delayed shipments and a weakened development of next-generation products

“Significantly, in the short term, there will be an adverse effect on 5G devices. No sooner had 5G smartphones started to gain some traction and break into the market in significant numbers, than the outbreak will now trigger a suppression of its near-term growth, pushing out the development and introduction of affordable 5G phones,” McQueen explains.” This move to lower price tiers was expected to become a key driver for boosting 5G smartphone shipments in 2020, but the desired impact will now be lessened throughout the year due to the outbreak. ABI Research says that shipment volumes for 5G smartphones in 2020 will be much lower than previously expected, slowed by a stagnant supply chain and crippled demand.

“Undoubtedly, the market will also be faced with numerous disruptions and delays, most notably the launch of Apple’s first 5G iPhones that are due to appear in September 2020,” says McQueen. (Note that other analysts disagree and feel that the smartphones will arrive this fall.)

In the longer term, expectations are that the outbreak will gradually come under control by end of the second quarter of 2020, but it will take some time thereafter for consumer confidence to return and for the device sector to recover. “Importantly, with such a large proportion of the world’s mobile device market relying on China for manufacturing and component supply, which is contending with disruption on a massive scale, it has become clear that many in the chain were woefully unprepared to react quickly,” McQueen says

It is not clear what the full extent or lasting effect that COVID-19 will have on the mobile device ecosystem, but in the short- to medium-term, it will heavily impact the smartphone market. 

“Aside from taking its toll on both demand and the supply chain, it will particularly affect the industry’s eagerness to drive 5G to lower price points in 2020, seriously blunting its growth potential,” adds McQueen.