- The Germany smartphone market had the worst quarter at the height of COVID-19, with sales plunging 27% from a year earlier. However, the market now is in a gradual recovery, bouncing back from the low of April.
- Apple gained share as its iPhone SE 2020 hit the spot among mid-tier devices. Huawei suffered losses in contrast.
- Xiaomi, emerging as the next Huawei in Germany, gained share and its sales jumped 250% compared to last year.
Germany smartphone sales saw a big fall of 27% in Q2 2020 compared to a year ago. The figure was down 15% from the previous quarter. Europe’s largest economy went into a nationwide lockdown in mid-March in an attempt to contain the COVID-19 outbreak. But this drastic measure ended up pushing the economy into a recession in the second quarter. The nation’s GDP decreased sharply to 10.1% while consumer spending shrank by 10.9%. Smartphone market tumbled due to closures of almost all physical shops and many consumers putting off their next smartphone purchase due to the prevailing economic uncertainty.
Exhibit 1: Germany Smartphone Market Monthly Unit Sales
Samsung and Apple effectively respond to the pandemic
Samsung, the leading smartphone player in Germany, maintained its position in the market with a 37% share, similar to the year-ago level. The strong performance of new low-end Galaxy A series models A21s and A41 helped it hold this position. Apple saw growth with an increase in share to 23% from 16% a year ago. However, it declined compared to the previous quarter, affected strongly by seasonality. Apple’s growth in the second quarter was due to strong demand for the new iPhone SE 2020. The affordable iPhone with new hardware caters to more price-conscious buyers amid a COVID-19-driven recession. Huawei remained at an 18% share, similar to the level in the previous quarter but slightly less than that in the same period last year.
Exhibit 2: Germany Smartphone Sales: Brand Share (%)
Xiaomi’s remarkable growth
Xiaomi has shown remarkable growth. Its market share expanded gradually over a year, increasing from 1% in Q2 2019 to 5% in Q2 2020. The pandemic also contributed to the good Q2 show. In terms of sales figures, the Chinese company reported nearly a 250% jump compared to a year ago. Xiaomi’s best-selling model was the Mi 10 5G, priced at $700. Xiaomi started its smartphone business by selling entry-level models, and now it is expanding to the lucrative high-end market. As Germany is also a key high-end market, Xiaomi has undertaken aggressive marketing there, such as opening its first Mi Store in the market despite the pandemic situation. Xiaomi may emerge as the next Huawei in Germany, benefitting from the effect of US trade sanctions against Huawei.
Smartphone market moves towards low-mid-end segment
One of the major impacts of the pandemic on the smartphone market has been the sluggish demand in the premium segment. The $800 and above segment shrank to 7% from 19% in the previous quarter, and from 13% a year earlier. Samsung’s flagship Galaxy S20 series from the same segment was hit hard by the pandemic right after its launch in March. Meanwhile, the $300-600 segment increased sharply to 30% from 23% in the previous quarter, and from 15% a year earlier. The strong performance of iPhone SE 2020 and Galaxy A71 helped drive the low-mid segment gains. This change in consumer sentiment was evident in the findings of Counterpoint’s consumer survey conducted in May-June. 30% of the respondents said they would wait longer than usual for their next smartphone purchase, while 40% of the respondents said they were planning to cut their budget for future smartphone purchases.
Exhibit 3: Germany Smartphone Sales by Wholesale Price Band (%)
Outlook: Smartphone sales will rebound in the third quarter
The German smartphone market has started to recover slowly from the low reached in April. We expect smartphone sales to rise in the third quarter. Economists too are forecasting economic improvement for the same quarter. Although infection rates are surging again, Germany is reluctant to go in for fresh lockdowns. Instead, Chancellor Angela Merkel is weighing personal protection measures like wearing masks. Therefore, we expect the second wave of COVID-19 will have less impact on the smartphone market than the initial outbreaks of April 2020.
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