Growth in the Smartphone Market Likely to Return in 2020

Launch of 5G devices and services, as well as growing demand in emerging markets, like India, Russia, Indonesia, will help the global smartphone market return to growth in 2020. This is after another year of slow sales in 2019 due to a slowdown in the developed markets due to a longer replacement cycle, increasing sales of refurbished devices, the lack of 5G iPhones, and the US’ trade ban on Huawei.

We estimate that smartphone shipments in 2019 will decline by 3% year-on-year (YoY). So far, in 2019, the mobile phone market faced a slowdown as many developed markets have broadly transitioned to 4G networks and smartphones. The launch of 5G services in 2019 will bring some relief to OEMs and reduce the quantum of market decline in 2019. However, the impact of the launch of 5G devices and services will fully reflect in 2020.

The decline in 2019 is also attributable to growing ASPs of the premium tier with higher quality hardware, which will continue to increase holding periods. Initially, operators providing subsidies on high-cost 5G devices, in order to poach in early users, will help push 5G device shipments. The prices of such devices are estimated to decline in 2020 and will further increase the adoption.

Looking closely at the other factors that hindered smartphone sales in 2019, we see that the untimely ban on Huawei has left a big mark on the global smartphone market. However, Huawei has been aggressively increasing its market share in China to counter the decline in overseas markets. The brand has already shipped over 115 million smartphones in H1 2019, and the push in China will help it post annual growth in 2019.

Apart from the Huawei trade ban, factors like elongated upgrade cycles and increasing sales of refurbished devices are also contributing to the slowdown. In emerging countries, many mobile phone users are not buying a new phone and rather opting for a second hand or refurbished phone.  Mature markets have also seen a more organized and efficient refurbished and used devices marketplace.

Close to 140 million refurbished phones were sold in 2018, showing marginal growth. This put a dent in the demand for new handsets, and as a result, shipment for smartphones declined 4% year-on-year (YoY) in 2018. Regions seeing the highest volumes include the US and Europe. The fastest-growing markets for refurbs include Africa, South East Asia, and India. These volumes are now considerably past rounding errors and are affecting growth rates.

While longer replacement cycles and increasing refurbished devices sales will continue to hamper the smartphone market in 2020, the launch of the new 5G iPhone, as well as demand for 5G devices to access services, will help the market post year-on-year growth in 2020.

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