There is growing concern over the economic damage caused by the spread of the new coronavirus, which began in China in January 2020. the Lunar New Year holiday lasted from the end of January to the beginning of February. The World Health Organization (WHO) declared a "public health emergency of international concern" on January 30.
The clearest immediate impact stems from the Chinese government’s limitations on movement of people and logistics in certain regions in order to prevent the spread of disease. Moreover, the Chinese Lunar New Year holiday is extended by one more week to 9th of Feb. Therefore, reduced production is inevitable due to reduced time and parts supply. The impact on shipments in January is likely to be limited, because of the holiday period and the fact that the first quarter typically records the least shipments in a year. However, weaker smartphone demand in February and March is inevitable. Especially in March, after Chinese Lunar New Year holidays, shipment volume increases, and many OEMs start shipping new product.
There is no timeline for the outbreak to subside or end. A “least negative” scenario is that the situation may end in this month, as the spread stops and the number of cures increases. Even in this case, there would be period of delayed ramp up, as people and material make their way slowly through the backlog created by the existing restrictions on movement.
However, the possibility of this situation being prolonged beyond a month or two cannot be ruled out. In the long term, the recovery of the supply chain will take longer time, which will affect not only China and Asia-Pacific, but also global supply.
Chinese domestic market most heavily affected, but impact felt globally
China is the world’s largest smartphone market, accounting for 27% market share in 2019, according to the Mobile Handset Database – country - Q3’19 report by IHS Markit. The number of smartphones shipped to China annually is expected to reach 373.9M units in 2019, a 4% decrease from 390.8M units in 2018.
In the Q3 ’19 forecast update, IHS Markit predicted that the Chinese market would stop declining and rebound in 2020. However, due to the current situation, the Chinese market is likely to contract in units again. Global smartphone shipments are also likely to be lower than previously expected.
The biggest negative impact will be felt in Chinese domestic sales. As the outbreak period grows, weakening demand will extend to other regions. Therefore, we analyzed the impact on the global smartphone market based on two scenarios: short- and medium-term.
We have developed two initial scenarios for how this emergency will impact the global smartphone market. For clients, please read on for the full breakdown of scenarios.