IDC has not yet released data for global smartphone shipments for the first quarter of 2020, something the firm typically does in April. Global smartphone shipments were already on the decline for several consecutive quarters before the pandemic hit, as people were holding onto older phone models for longer. There was a modest return to growth in the third quarter of 2019, of just under 1 percent, but that turned out to be a blip. In February 2020, the firm issued a note saying that Covid-19 could result in a 10 percent year-over-year decline for smartphone shipments in the first half of 2020.
Now, Reith says, the firm is starting to see declines in consumption, too, particularly in China, the world’s largest smartphone market. He estimates that smartphone purchases in China were down 40 percent in January and 60 percent in February, compared to the same months a year prior.
As Bank of America noted in its report on the US economy last week, the consumer is “on the frontline from the shock of the Covid-19 pandemic.” In early March there was a sharp drop in spending on travel and lodging; by the middle of the month, this had spread to recreation, clothes, entertainment, and “other discretionary goods and services.” Jobless claims have skyrocketed, to 6.6 million last week. The Federal Reserve bank of St. Louis has estimated that the unemployment rate could soar to 32 percent in the second quarter of this year. Others, such as Bank of America, are predicting a much lower (but still record-setting) unemployment peak of 15.6 percent.
Things like tax rebates, expanded unemployment benefits, and stimulus checks could help offset some lost income for people, but “it will take time for income to return to pre-COVID 19 levels, retraining the recovery,” the Bank of America analysts note.
“Certainly, $1,200 checks—ones that won’t go to everyone—that doesn’t mean people are sitting there saying, OK great, I’m going to buy an iPhone now,’ even if it’s $500,” IDC’s Reith says, referring to the stimulus check that’s part of the Coronavirus Aid, Relief, and Economic Security Act.
“The first consumer goods to collapse in a recession are the durables, which includes discretionary gadgets,” says Heffetz. “There was a time period when these phones gave us freedom; you could be out of the office or at the beach or at the bar but you could still be working. You were always accessible. Now I’m at home, in front of a big screen, on Wi-Fi the whole time.” He notes that regardless of how extended our isolation periods are, it may change the way we think about what technology is necessary in our lives.
In the aftermath of the 2008 recession, Heffetz says, some people convinced themselves that upgrading from a Nokia mobile phone to a smartphone was a justifiable expense for maintaining professional networks. Now, those must-haves might be a faster internet connection at home, a good laptop for working remotely, or a tablet for your child so they can stream their homework.
How Apple and Samsung Will Fare
Analysts are mixed on how weakened demand for smartphones might ultimately affect premium phone makers like Apple and Samsung. Despite year-over-year declines for global smartphone sales in the holiday quarter of 2019, Apple showed signs of growth, particularly in China. Samsung held on to its position as the number one phone-maker in the world. But at that point, concerns about coronavirus weren’t widespread.
“If this is elongated until September, I think it really hurts Apple’s heart,” says Pat Moorhead, founder and principal analyst at Moor Insights & Strategy. “While Apple has done a good job diversifying itself with things like services, it’s still predominantly an iPhone company. And if you’ve lost your job, you’re worried about the future, and you can’t delay your insurance payment or your mortgage payment, the phone is a nice-to-have thing. The only exception is if it’s broken.”
