Smartphone market expected to sink this year but will rebound due to 5G push

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Shipments are forecast to drop almost 10% for 2020, but a revival is due in 2022 courtesy of a 5G push and other factors, says research firm IDC. Image: Getty Images/iStockphoto Global smartphone shipments will fall by 9.5% this year to 1.2 billion units as a result of economic concerns, […]

Shipments are forecast to drop almost 10% for 2020, but a revival is due in 2022 courtesy of a 5G push and other factors, says research firm IDC.

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Image: Getty Images/iStockphoto

Global smartphone shipments will fall by 9.5% this year to 1.2 billion units as a result of economic concerns, IDC projected in a report released Thursday. Though the second quarter results were slightly better than expected, the market was still down by 17% compared with the same period last year.

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Like many sectors, the smartphone industry has been hit hard by the coronavirus pandemic and resulting lockdown. Despite the shift to remote working and self-quarantining, a lack of consumer demand amid fears of an economic slowdown have reduced smartphone shipments.

Prior to the pandemic, total smartphone sales were expected to return to growth this year, IDC said, but now that possibility is off the table.

smartphone-market-forecast-2020-idc.jpg

Image: IDC

On a more positive note, the market is forecast to rebound next year and stage a full recovery by 2022, achieving a compound annual growth rate (CAGR) of 1.7% over the five years from 2020 through 2024. Much of this optimism is based on IDC’s assumption that smartphones will continue to be the computing platform of choice for most of the world. But there are more specific reasons, including the push of 5G.

SEE: Future of 5G: Projections, rollouts, use cases, and more (free PDF) (TechRepublic)

“5G remains a priority for all smartphone OEMs despite the challenges with the COVID-19 pandemic and lack of consumer demand,” Ryan Reith, program vice president with IDC’s Worldwide Mobile Device Trackers, said in a press release. “While many of the top vendors have reduced their 2020 production plans to align with the market decline, we’ve seen most of the cuts focused on their 4G portfolios.”

The smartphone lineup from most retailers in developed regions will focus on 5G units, leaving less space for 4G devices, according to Reith. Still, consumer demand for 5G phones remains low. Add in the economic concerns among consumers, and retailers will be under pressure to lower the costs of both hardware and service fees associated with 5G.

In response, IDC expects the average selling price (ASPs) of global 5G smartphones to reach $495 by 2023, reducing most of the concern about costs expressed by consumers in recent surveys. The price level should help 5G phones win more than 50% of the global smartphone market by 2023, IDC added.

Beyond 5G, though, other factors will play a role in the actual market recovery in 2022. One of those will be the continued demand for 4G devices in developing regions.

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“Although we expect year-over-year growth of 9% in 2021, that is only due to the large drop in 2020,” Nabila Popal, research director with IDC’s Worldwide Mobile Device Trackers, said in a press release. “The real recovery won’t happen until 2022 when smartphone volumes return to pre-COVID levels. Other elements beyond 5G will play a role in the market recovery, most notably the continued opportunity in developing markets. There continues to be a strong shift towards low- to mid-end 4G devices in developing regions, which make up over 80% of smartphone volumes in these regions.”

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