FRAMINGHAM, MA – Shipments of smartphones and PCs will be impacted in 2020 due to the coronavirus (COVID-19), but no one is sure how much and for how long. IDC today lowered its earlier forecasts for the two markets, noting the biggest hits are expected to occur in the first half.
The worldwide smartphone market is expected to decline 2.3% in 2020, with shipment volume over 1.3 billion, IDC said. The COVID-19 outbreak is expected to stress the short-term scenario, with shipments declining 10.6% year-over-year in the first half of the year. Global smartphone shipments are expected to return to growth in 2021, driven by accelerated 5G efforts.
IDC ascribes a multi-quarter recovery for manufacturing and logistics, given a more gradual return of Chinese workers to factories amid persisting transportation challenges. China's demand shock extends several quarters but is mitigated by the end of the year with the aid of government-backed stimuli and subsidies, the research firm says. Demand in surrounding regions will also be briefly suppressed. Global smartphone shipments show a more u-shaped recovery from the second half of the year. However, actual phone shipments could show a different overall shape, given the seasonal nature of shipments.
"COVID-19 became yet another reason to extend the current trend of smartphone market contraction, dampening growth in the first half of the year,” said Sangeetika Srivastava, senior research analyst with IDC's Worldwide Mobile Device Trackers. “While China, the largest smartphone market, will take the biggest hit, other major geographies will feel the hit from supply-chain disruptions. Component shortages, factory shutdowns, quarantine mandates, logistics, and travel restrictions will create hindrances for smartphone vendors to produce handsets and roll out new devices. The overall scenario is expected to stabilize from the third quarter of the year, as the COVID-19 situation hopefully improves and 5G plans pick up the pace globally."
"For the epicenter, China, we forecast the domestic market to drop by nearly 40% year-over-year for the first quarter, and even with a potential March recovery, it will still be difficult to reach last year's levels," said Will Wong, research manager with IDC's Asia/Pacific Client Devices Group. "Buyers will purchase from online channels, which will account for a significantly increased share of phones sold in the first half of 2020 and may represent a permanent shift in buying behaviors."
The epidemic outbreak will undermine the Chinese economy, according to IDC, and the many SMEs will likely bear the brunt, leading to tightened wallets of consumers. At the same time, the SMEs in the phone industry, especially retail channel partners, will see the biggest effect, and phone vendors that can effectively help their retail channel and other partners recover and reconsolidate after the end of the epidemic will secure more opportunities in the long-term.
PC Growth to Slow Until 2024
Personal computing device shipments will decline 9% in 2020, reaching 374.2 million by year's end. However, the long-term forecast remains slightly positive, as global shipments are forecast to grow to 377.2 million in 2024, with a five-year CAGR of 0.2%.
IDC forecasts a decline of 8.2% in shipments during the first quarter, followed by a decline of 12.7% in the second quarter, as the existing inventory of components and finished goods from the first quarter will have been depleted by the second quarter. In the second half of the year, growth rates are expected to improve, though the market will remain in decline.
"We have already forgone nearly a month of production given the two-week extension to the Lunar New Year break, and we expect the road to recovery for China's supply chain to be long, with a slow trickle of labor back to factories in impacted provinces until May when the weather improves," said Linn Huang, research vice president, Devices & Displays. "Many critical components such as panels, touch sensors, and printed circuit boards come out of these impacted regions, which will cause a supply crunch heading into the second quarter."
"There's no doubt 2020 will remain challenged, as manufacturing levels are at an all-time low, and even the products that are ready to ship face issues with logistics," said Jitesh Ubrani, research manager for IDC's Worldwide Mobile Device Trackers. "Lost wages associated with factory shutdowns and the overall reduction in quality of life will further the decline in the second half of the year as demand will be negatively impacted."
Assuming the spread of the virus subsides in 2020, IDC anticipates minor growth in 2021 as the market returns to normal, with growth stemming from modern form factors such as thin and light notebooks, detachable tablets, and convertible laptops. Many commercial organizations are expected to refresh their devices and move toward these modern form factors to attract and retain a younger workforce. Meanwhile, consumer demand in gaming, as well as the rise in cellular-enabled PCs and tablets will also help provide a marginal uplift.