Will Growth of Smartphone ODMs Stagnate Under the COVID-19 Crisis?

According to the latest research from Counterpoint’s ODM/IDH/EMS tracker, shipments from ODM/IDH companies grew by 4% y/y (year-on-year) in 2019 against the declining trend in the overall smartphone market (-2% y/y). We had anticipated the positive YoY growth to continue in 2020.

However, the COVID-19 pandemic has been rapidly spreading across the globe since March, bringing a variety of uncertainties to ODMs’ business outlook. Following the restriction of commerce activities beyond China to the U.S., India, Europe, some South East Asia (SEA) and Latin America (LATAM) countries, a steep decline of the global smartphone market can be expected. Will OEMs cut orders to ODMs under the dismal market circumstance? Will ODMs fall from the positive path to a downward curve in 2020? Here is our analysis.

  • When the pandemic broke out in China during Q1, the impact on smartphone ODMs appeared less severe than their Chinese OEM clients, as most orders outsourced to ODMs were devices developed for overseas markets. Some overseas OEMs even increased orders to ODMs, under the fear of potential supply shortages in case China failed to efficiently control the virus.
  • As the pandemic spread outside China, ODMs started to worry and re-evaluate their business forecast for the year.
  • According to Counterpoint’s Market Pulse – Monthly Smartphone Sales Tracking Service, global smartphone sales, as well as sales in most of the regional markets, have evidently dropped in March (See Exhibit 1).

Exhibit 1: Counterpoint Research-Global Smartphone Market Changes

Counterpoint Research-Global Smartphone Market Changes

Source: Counterpoint Market Pulse Service Mar 2020

  • While the decline in the U.S., Western Europe and LATAM appeared more severe than other regions during March, we expect India, the 2nd largest smartphone market, to experience plummeting sales in April under the strict lockdown throughout the country. Sales in China have recovered sequentially since March, but still struggled to grow to the level from the same period last year.
  • Impacts of the COVID-19 crisis on smartphone ODMs vary depending on their client’s portfolio and the end markets of their clients’ businesses.

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For the detailed analysis on ODMs’ clients portfolio, as well as major OEMs’ design and manufacturing out-sourcing strategy, please CLICK here for access to the full report “ Global Smartphone ODM/EMS Report 2019-2020”.