• Continued rebound in the US and Europe. The risk of recession continues to drop. • Inflation trending down faster than expected in the US and Europe. • Rate hiking regime ends in Q3 2023. Rate cuts begin to be formulated by central banks in 2024.
Tech Sentiment:
• Tech outlook turned brighter after earnings season.
International Politics:
• High-level meetings between US and China officials signal a willingness to prevent further fallout.
The Bad
US:
• Business sentiment turns negative. • Partisan politics starts impacting the proper functioning of government.
China:
• Economic data disappoint. • Souring business and consumer sentiment, with few signs of stimulus measures.
Europe:
• Lacklustre growth prospects and weak consumer sentiment. • Social tensions spill over to the streets, while far-right parties gain ground.
Regulation:
• US-China tech war continues.
Likely Trajectory
• Continued grind upwards, but the worst is behind us. • Q3’s 1-year forecast has been trimmed from Q2’s due to reverse in business sentiment. • Economic data recovery to continue, but global growth prospects is under pressure.
Delayed recovery timeframe as compared to three months ago:
• Lacklustre European economic data. • Appetite for consumer tech spending rebound remains weak. • Interest rates to remain high. • China’s rebound faltering. • Continued US-China tensions. • Russia-Ukraine war.
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It includes a regional (US, China, Europe) and segment (Consumer, Business, Tech, and Politics & Policy Sentiment) breakdown of the Index, as well as a ‘Risk-Impact Map’ for the biggest macro issues in the short to medium term.
The number of active brands is down to almost 250 in 2023 so far from over 700 in 2017.
The decline in the number of active brands is almost entirely coming from local brands.
A maturing user base, improving device quality and recent industry headwinds are some of the reasons for the declining number of active brands.
At its peak in 2017, the global smartphone market saw more than 700 brands fiercely competing. Fast forward to 2023 and the number of active brands (that have recorded sell-through volumes) is down by two-thirds to almost 250, according to Counterpoint’s Global Handset Model Sales Tracker, which has been tracking sales of these brands across more than 70 key countries.
A maturing user base, improving device quality, longer replacement cycles, economic headwinds, supply-chain bottlenecks and major technological transitions such as 4G to 5G have gradually whittled down the number of active brands and their volumes over the years. For example, local smartphone brands, once known as “local kings”, like Micromax in India and Symphony in Bangladesh, have lost significant share or even exited over the last five years.
Decline of local brands
Strikingly, the decline in the number of active brands is coming largely from local brands, while the number of global brands has remained mostly consistent. Most local brands operate in lower price bands and in regions that have fragmented markets across wide geographies, like Asia-Pacific, Latin America and Middle East & Africa.
Source: Counterpoint Research Global Monthly Handset Sales Tracker. *Active smartphone brands: Smartphone brands that recorded sell-through volumes in that calendar year.
Brands lag in R&D and marketing efforts
In a rapidly evolving smartphone industry, small brands have struggled to keep up with big brands across many fronts. While big brands have continued to invest in R&D, manufacturing and capacity building, small brands have been largely dependent on white-label devices. Furthermore, large promotional and marketing events and big-name brand ambassador tie-ups from sports and movies are commonplace for big brands, which most small brands don’t have the resources to do.
Difficulty adapting to change
There were many other reasons which made the smaller local brands fail. Some of the key ones were:
Inability to keep up with market demand for better specifications, design, brand value and ecosystem integration.
Going forward, the number of smartphone brands will continue to decrease, and large global brands will be in the best position to adapt to all the macroeconomic headwinds and technological transitions in the market.
We have prepared a much more detailed report on this subject. Leave us a message in the contact box to access the report. Topics covered in this report include:
Lists of “local kings” who have exited the market.
Market volume decline trends for the most prominent local kings.
Recaps of the battles lost by local kings in major countries.
Counterpoint Macro Index reading of 79.53 for June 2023 marked the second quarterly rebound in a row and the highest level in 9 months.
Geopolitical tensions, poor demand visibility, tougher regulatory measures and a tepid outlook in China are the biggest constraints to the tech industry.
Meanwhile, consumer and producer inflation rates have dropped considerably across the world, lowering the risk of recession and boosting business sentiment. The excitement around AI and VR is adding further impetus to the tech industry’s outlook.
Our new forecast continues to show gradual recovery and we expect normalization by H2 2024.
London, Beijing, Taipei, Seoul, Boston, Toronto, New Delhi, Hong Kong – July 31, 2023
The Counterpoint Macro Index’s reading at the end of Q2 2023 was 79.53 as of June 2023, a small increase of 2.08 points from the reading in March. The reading in June marked the Index’s fourth straight monthly increase, despite being in deeply negative territory (baseline: 100) for 17 consecutive months. It was also the second quarterly rebound in a row and the highest level in nine months.
The Counterpoint Macro Index tracks the environment and prevailing sentiment in the global technology industry.
Source: Counterpoint Research
The main reason for the improvement was better global economic numbers. Most notably, consumer and producer inflation rates have dropped considerably, ensuring central banks start contemplating an end to the rate hike regime. On the other hand, employment and consumer sentiment have remained strong, while business sentiment has recovered, particularly in the US. As a result, the tech sector can afford to breathe a sigh of relief. The tech sector was among the most bearish for some time, but the outlook has brightened after Big Tech reported a resilient set of earnings during Q1 2023. Additionally, excitement around emerging tech like AI and VR, and the launch of new products such as foldable smartphones, widening availability of renewable energy solutions and electric vehicles, has reignited hopes that demand normalization may be achieved in 2024.
On the other hand, unsurprisingly, the biggest constraints for the Index in Q2 2023 were yet again in the international arena, as the Russia-Ukraine War continued without an end in sight, US-China relations remained tense after some near accidents and high-level meetings between officials. One issue that we did not foresee was China’s economic recovery reversing course quicker than previously expected. This additionally darkened the prospect for a global recovery in tech demand, particularly as gloomy projections for device sales such as smartphones and PCs continued due to high levels of inventory across the supply chain. Furthermore, regulations have also become more confrontational, with high-profile cases involving competition, privacy, national security and the future of AI playing out in the public.
Source: Counterpoint Research
Our new 12-month forecast, which extends to June 2024, shows that the current recovery trajectory is expected to remain on course. It is slightly below the forecast we made back in June 2023, but nevertheless, the Index is expected return to positive territory by H2 2024. We believe the worst of the macroeconomic headwinds have already passed, as encouraging economic data around the world will continue to boost growth prospects for tech. Despite this, there continue to be significant potential pitfalls, such as the worsening US-China tech war, the Russia-Ukraine war turning deadlier, polarization in the US and European politics leading to policy paralysis, continued weakness in consumer tech spending and demand/supply rebalancing taking longer than expected.
Counterpoint Research’s market-leading Macro Index is a monthly tracker that aims to capture the environment and sentiment for the global technology industry. We look at issues and measures in macroeconomics, domestic and international politics, supply chains, industry performance and outlook, and regulatory events and outlook. The index captures more than 130 data points every month. Below are some of the key data points that we track:
Source: Counterpoint Research
The service is available for subscribing clients.
Feel free to contact us at press@counterpointresearch.com for questions regarding our in-depth research and insights.
Background
Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.
The smartphone market will experience an annual decline for the first time in history
Seoul, London, San Diego, Mumbai, Hong Kong, Buenos Aires – November 3, 2018
According to Counterpoint’s latest smartphone forecast report, smartphone growth will drop to a negative 1.3% in 2018. This is a first in the history of smartphones that the market has contracted year over year.
It was a tough year already as the market had been experiencing negative growth since the fourth quarter of 2017. This negative trend is expected to continue in the September quarter and upcoming December quarter. After years of growth the smartphone market has finally come to a halt. To be accurate the market had enjoyed a CAGR (compound annual growth rate) of 16% for the last five years between 2012 and 2017. This is close to growing 16% every year.
This is a mixture of multiple factors starting from the global economy slowing down and exchange rates in emerging markets fluctuating rapidly as in the case of Latin America (see here). The US – China tariff wars aren’t helping the situation either. Some markets are cooling down after years of overshooting caused by extreme competition. But at the core of the weak demand could be the change in consumer behavior.
Commenting on the weak market demand, Research Director, Tom Kang explained, “Many markets have already hit a saturation point for new smartphone demand and are dependent on replacement demand. However, since last year consumers have decided to trade up whenever they had the chance and are thus going for a better device, despite the price difference. This is evident in the introduction of Apple’s iPhone X last year. But buying a more expensive device results in extending the length of replacement cycles, especially when your earnings are limited.”
Longer replacement cycles have led to fewer smartphones consumed. However, it has a positive effect to manufacturers. Higher smartphone ASPs has led to more revenue; despite the negative growth in smartphone shipments, smartphone revenues are expected to show positive growth.
Tom Kang added, “Overall smartphone revenue may grow 9% compared to last year. This is even higher than the 7% revenue growth of 2017.”
The higher price points are justified by more capacity NAND flash storage, better processing power with AI functionality baked-in, more durable designs, and of course, more camera sensors for better picture quality.
Next year likely won’t be much different as the trend continues with the new Apple iPhone Xs Max introduced at a higher price point, Samsung’s foldable smartphone coming soon and 5G smartphones on the horizon. But again, smartphone ASPs will likely grow more steeply to offset the low volume growth.
The full forecast with the assumptions is available for subscribing clients to Counterpoint’s mobile device service. The methodology involves insights from consumer surveys, industry interviews and public IR documents. Feel free to reach out to us at press@counterpointresearch.com for further questions regarding our in-depth latest research, insights or press enquiries.
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