Coronavirus may be another reason why you don’t upgrade your smartphone this year.
Industry forecasts anticipate that global smartphone production will be hit hard as a result of the outbreak of COVID-19 that began in December. China, the smartphone manufacturing hub of the world, is now choked off from suppliers, workers, and logistics networks. Analysis firm TrendForce predicted this week that production of smartphones will have decreased by 12% in the first three months of 2020, compared to the same period last year.
Apple announced earlier this week that it doesn’t expect to meet its second-quarter financial guidance due to stalled production in China as a result of the outbreak. Most of Apple’s retail stores in China remain closed after shutting down last month.
Samsung, which moved much of its production to Vietnam in recent years, is also likely to face production delays. Vietnam’s Ministry of Industry of Trade told Reuters that supply chain problems as a result of the coronavirus will likely delay production of Samsung’s latest models. “Vietnam relies much on China for materials and equipment, which makes the country become vulnerable when such outbreak happens,” it said. Samsung’s S20 Galaxy lineup, announced this month, will begin shipping in March; Samsung has not confirmed if the outbreak will delay when those phones hit stores.
Delays in production aren’t the only threat to the smartphone industry. China is also the world’s largest smartphone market. Domestic smartphone manufacturers like Huawei, Xiaomi, Oppo, and Vivo will be hit with a double-whammy: less demand for their products and delayed production as consumers and workers stay home.
A drop in demand in China will be a major factor in a decline in smartphone sales, according to Anna Ahrens, an analyst with IHS Markit. “There needs to be time for people to get back to normal life, and demand will not recover fast.”
But the smartphone industry’s struggles predate the coronavirus outbreak. Global smartphone sales have already been on the decline, partly because people are holding on to their handsets for longer. Advances in technology have extended battery life and upgraded camera tech to the point that many users don’t see the point of giving up perfectly good devices that are two or even three upgrade cycles out-of-date.
Most smartphone manufacturers saw fewer shipments in 2019 than 2018, according to analysis from IHS Markit.
In this environment, one might expect the price of smartphones to increase. But it’s unlikely consumers will see higher-priced phones this year as a result of the coronavirus. Far more likely are temporary shortages, delays in fulfilling orders, or stores not having certain models in stock.
“In the short run, I don’t think prices will rise, because most brands don’t want to be seen as taking advantage or profit from a bad situation,” said Frank Gillett, an analyst with Forrester, in an interview with Quartz.
And even in the long run, price increases may be unlikely. Why? Because most smartphone users may decide to just wait out the storm, and companies will lose out on new sales. “Most people can keep using the phones they have and delay an upgrade,” said Gillett.
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