China’s smartphone market could sink 20% as covid case spike – but Apple may

China’s smartphone market is expected to decline in the second quarter due to a resurgence of covid cases in the country, analysts say. But Apple could run quite well, analysts say, as it continues to attract users to the upper end of the market.

Future Publications | Future Publications | Getty Images

China’s recent rise in the Kovid threaten to hurt sales of handsets in the world’s largest smartphone market if it is not contained, the US giant Apple could still hold on well, analysts told CNBC.

On Wednesday, China reported more than 20,000 Kovid infections with a majority in Shanghai’s mega-city. Authorities there have imposed strict lockdown measures in the city, threatening logistical and consumer costs.

Neil Mauston, executive director of Strategy Analytics, forecasts a 20% year-over-year decline in second-quarter smartphone shipments.

Neil Shah, a partner at Counterpoint Research, said CNBC smartphone sales in April and May could fall by 12% to 13% a year.

Sales may increase in June due to a huge discount shopping event and a reduction in covid. This could reduce smartphone sales in China by 3% to 4%, Shah said. If the coveted situation continues, however, the market could decline by as much as 12% a year, he added.

In China, the Android segment remains a brutal marketplace, with half a dozen brands (like Xiaomi) battling for a fraction of a shrinking Android pie.

Neil Mauston

Executive Director, Strategy Analysis

Will Wong, IDC’s research manager, predicts that smartphone shipments could decline by about 3.4% year-on-year in the second quarter.

“The impact is expected to come mainly from soft consumer demand and sentiment caused by the Kovid outbreak and the slowdown in economic activity,” Wong told CNBC. “Supply disruptions will be a less annoying factor because the government’s experience in preventing factory bubbles and outbreaks can help reduce the impact.”

In March, Apple iPhone assembler Foxconn had to briefly close one of its major factories in Shenzhen due to Kovid. During the Kovid outbreak, China tried to keep the factory running as much as possible to reduce disruption.

China’s smartphone shipments will fall in the second quarter “mainly due to the weakening of the Android market,” said Wong of IDC.

Android is Google’s smartphone operating system. Chinese brands run modified versions of these. Android phone vendors include Chinese smartphone makers such as Xiaomi, Oppo and Vivo.

“The Android segment remains a brutal marketplace in China, with half a dozen brands (like Xiaomi) battling for a fraction of a shrinking Android pie,” said Strategy Analytics’ Mauston.

However, Apple can pay quite a bit. Shah said Apple could see shipments fall by about 4% to 5% in the second quarter, but this is partly seasonal because the impact of the brand’s new product launches is off. Apple released its new product late last year.

According to both Shah and Wong, Apple is taking advantage of Huawei’s fall to the premium edge of the market. Huawei’s smartphone business has been crippled by a US embargo that excludes technology giants from key components such as cutting-edge chips.

Wong said Apple could actually see positive growth in the second quarter “between the fall of Huawei and the lack of strong top-competitors.”

Mauston said he expects Apple to actually increase its overall market share in China by 2022 “as loyal, affluent fans upgrade to newer or more affordable 5G models.”

5G means next generation mobile internet which promises very fast speed. Apple launched the 2022 version of the cheaper iPhone SE in March, offering 5G.

Leave a Reply

Your email address will not be published.