First-quarter smartphone sales may halve due to coronavirus

A woman wearing a face mask talks on her mobile phone at a commercial complex after the extended Lunar New Year holiday caused by the novel coronavirus outbreak, in Beijing's central business district, China. REUTERS/Stringer

SHANGHAI (Reuters) – China’s smartphone sales may plunge by as much as 50% in the first quarter, as many retail shops have closed for an extended period and production has yet to fully resume due to the fast spread of a new coronavirus, according to research reports.

The virus outbreak, which has killed more than 900 people and roiled China’s manufacturing industry, comes as top smartphone vendors such as Huawei had hoped China’s 5G rollout plans this year would help the world’s biggest smartphone market rebound after years of falling sales.

“Vendors’ planned product launches will be canceled or delayed, given that large public events are not allowed in China,” research firm Canalys said in a note last week.

“It will take time for vendors to change their product launch roadmaps in China, which is likely to dampen 5G shipments.”

Canalys expects China’s smartphone shipments to halve in the first quarter from a year ago, while IDC, another research firm that tracks the tech sector, forecasts a 30% drop.

Apple Inc said last week it is extending its retail store closures in China and has yet to finalise opening dates, as Foxconn, which assembles iPhones, struggles to fully resume factories.

Foxconn received government approval on Monday to resume production at a plant in the city of Zhenghzou, but its major plant in Shenzhen remain unopened.

Huawei, China’s biggest smartphone vendor, said its manufacturing capacity is “running normally” without specifying further. But like many other local peers, Huawei relies heavily on third-party manufacturers for production.

If factories cannot resume production to full capacity on time, this could delay brands’ ability to bring their newest products to market, analysts said.

Xiaomi Corp, Huawei, and Oppo, three of China’s top Android brands, are all expected to announce flagship devices in the first half.

Oppo told Reuters that while the impact of the virus will affect operations at some local factories, “manufacturing capacity can be guaranteed effectively” thanks to its plants overseas.

Xiaomi did not respond to requests for comment.

“The delays in reopening factories and the labour return time will not only affect shipments to stores, it will also affect the product launch times in the mid- and long-term,” Will Wong, an IDC analyst, said.

Globally, smartphone production will decrease by 12% in the March quarter to a five-year low of 275 million units, research firm TrendForce said on Monday. It revised down iPhone production by 10% to 41 million units, while Huawei’s output forecast was cut by 15% to 42.5 million phones.

Samsung Electronics Co, the world’s top smartphone maker, is seen the least affected by the virus outbreak as its main production base is in Vietnam, the report said, lowering its production forecasts by just 3% to 71.5 million units.

Researcher TrendForce also said on Monday it expected global smartphone production to fall by 12% to its lowest level in five years in the first three months of 2020 because a virus outbreak in China.

TrendForce said it cut its forecasts for the global smartphone output, expecting Huawei, Apple Inc. and other companies to bear brunt of the market slowdown.

(Reporting by Josh Horwitz and Hyunjoo Jin; Additional reporting by Hyunjoo Jin in Seoul; Editing by Miyoung Kim, Louise Heavens and Edmund Blair)

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