China economy slowdown and reduced demand likely to cause global smartphone output to fall steeply
Analysts from Credit Suisse predict that global smartphone production levels will drop by 19% in Q1 and even further thereafter.
A Credit Suisse technology research report indicates that major smartphone manufacturers are facing weak consumer sentiment in China and a decrease in demand.
The decrease in production volumes are likely to affect Chinese smartphone manufacturers as well as Samsung Electronics and Apple. Analysts at Credit Suisse also adjusted previous forecasts from an expected drop of 14% to 19%.
The report also predicts that Apple iPhone output will drop 40% in Q1, while component manufacturers are likely to experience a 50% drop in demand over the same period.
This forecast for the international smartphone market was made after a number of poor revenue outlooks from the biggest handset manufacturers. Samsung and Apple posted weak earnings recently, citing the slowdown in the Chinese economy due to a trade standoff with the USA as the main reason.
Chinese smartphones including OnePlus, Xiaomi Corp and Huawei Technologies have however also been taking market share away from Samsung and Apple, with lower prices and higher specifications.
Huawei was on track in December to ship 200 million smartphones in 2018 due to fast growth in the first three quarters of the year. Huawei outdid Apple in both Q2 and Q3 of 2018 to take second place in the smartphone stakes behind Samsung. Its smartphone division is also close to producing the same revenue as does its core telecoms equipment division.
In the last week of December, Apple decreased production for its iPhone and cut its reported earnings for Q4 from USD93 billion to USD84 billion in early January, citing the weak Chinese economy as the main reason.
Tim Cook, Apple’s chief executive told shareholders that more than 100% of their year-on-year global revenue decline and most of the revenue shortfall happened in Greater China across iPad, Mac and iPhone.
Samsung’s profit for Q4 of 2018 was also lower than expected, with operating income decreased by 29% to USD9.7 billion due to demand for its smartphones falling in China. The demand for components, including screens and memory chips produced for other companies was also down.
After a decline in market share in China from 20% securing them the top position in 2013 to below 1% 2018, Samsung closed one of its two mainland mobile phone factories in December.
Global smartphone shipments decreased by 7% in Q3 of 2018. Market research firm Canalys reports that this was the 4th consecutive quarter of declines. A full 7 of the world’s top 10 smartphone manufacturers reported year-on-year decreases, due to increased competition from Chinese companies, worsening trade conditions and lengthening phone replacement cycles.Source