Smartphone Sales Decline Begins To Impact Global Stock Markets

The bad news continues for the world’s smartphone manufacturers and their suppliers.  And President Trump’s decision to add a 25% tariff on smartphone component imports from China from June 25 is unlikely to help. Morgan Stanley estimates it will add $160 to the current US iPhone XS price of $999, while a state-backed Chinese consumer boycott of Apple phones may well develop in retaliation for US sanctions on Huawei.

Chances are that a perfect storm is developing around the industry as its phenomenal run since 2011 comes to an end:

  • Global sales fell 4% in Q1 as the chart shows, with volume of 330 million the lowest since Q3 2014
  • China’s market fell 3% to 88 million, whilst US volume fell 18% to 36 million
  • Apple has been badly hit, with US sales down 19% in Q1 and China sales down 25% in the past 6 months
  • Foldables have also failed to make a breakthrough, with Gartner estimating just 30 million sales by 2023

This downbeat news highlights the fact that replacement cycles are no longer every year/18 months, but have already pushed out to 2.6 years.  Consumers see no need to rush to buy the latest model, given that today’s phones already cater very well for their needs.

Apple’s volumes confirm the secular nature of the downturn, as its volume continued the decline seen in 2018 as the iPhone comes to the end of its lifecycle. Its market share also fell back to 13%, allowing Huawei to take second place behind Samsung with a 17.9% share.  This decline came about despite Apple making major price cuts for the XS and XR series, as well as introducing a trade-in program. Meanwhile, Samsung saw its profits fall 60%, the lowest since its battery problems in 2017.

The President’s tariffs are also set to impact sales, as manufacturers have to assume that today’s supply chains will need to be restructured. Manufacturing of low-end components can perhaps be easily relocated to countries such as Vietnam and other SE Asian countries.  But moving factories, like moving house, is a very disruptive process, and it is certainly not easy to find the technical skills required to make high-end components – which represent the core value proposition for consumers.

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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this ...

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