Much has been said about the impact of Covid-19 lockdowns on smartphone supply chains, sales and revenues. But have the doomsday predictions for the mobile market come true? First-quarter 2020 results seem to show that the smartphone industry has kept the calamitous prognoses at bay so far.
When Covid-19 forced companies to shut factories and retail stores, and lockdowns muffled consumer demand, crashing smartphone sales and losses were expected. But the doomsday predictions have been stonewalled to a large extent with mixed results across the industry, and Covid-19 is not the only reason for slowing growth and sales for some OEMs.
Apple’s Q1 2020 saviors – wearables and services
Apple reported solid revenues of $58.3 billion USD in Q1 2020, up 1% year-over-year. Apple’s iPhone revenues dropped, but only by 6.7% y-o-y.
However, Apple has seen decelerating revenue for iPhones as expensive phones have slowed phone upgrade rates. Apple’s slowing growth for iPhones in the first quarter cannot be attributed only to Covid-19.
The wearables, with their focus on m-health, and services have saved the company’s bottom-line frequently and Q1 2020 was no different. Apple is expecting luxury products like iPhone and wearables to perform worse year-over-year in Q2, while iPad and Mac business is expected to pick up as homeschooling and working from home extends into the foreseeable future.
Huawei’s struggles are more about Google and less about Covid-19
Huawei’s overall revenue growth slowed to 1% in Q1 2020 to $25.72 billion USD, a steep drop from 39% growth posted in Q1 2019. While the sharp drop in revenue can be attributed to Covid-19 closures in key markets like China and some parts of Europe in early Q1 (the rest of Europe didn’t go into lockdown till late March), that is not the full picture.
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Huawei had been grappling with the after effects of the US ban and the lack of Google’s services on its phones since late last year. Huawei’s second folding phone, the Mate Xs has also contributed to a downward trend in its financials having lost between $60 million and $70 million USD. Q2 does not look good for Huawei. The OEM has gone on record to say that 2020 will be its most difficult year, its first full year with U.S. sanctions as well as the effects of Covid-19.
Samsung and Xiaomi held their own
Samsung’s overall revenue for Q1 rose 5.6% to $45.4 billion USD, due to growing demand for Samsung’s mobile components and servers. Samsung’s mobile shipments declined in the latter part of Q1 2020 due to post-holiday seasonality and also because Samsung’s flagship Galaxy S20 phones were released when Covid-19 lockdowns took effect in some parts of Europe.
Samsung is projecting weaker profits in Q2 and expects a decrease in smartphone and overall consumer electronic demand due to Covid-19 shutdown and economic after-effects, leading to lower overall earnings.
China’s Xiaomi was the only OEM that saw growth across all metrics y-o-y. Xiaomi has a diverse portfolio of products, which are “connected” to each other, strengthening their interoperability and spurring product sales across international markets, which has helped it weather the fall. Covid-19 also added to huge losses at LG and Lenovo. Both companies have been struggling to establish themselves in the US, and the pandemic has the potential to completely derail their plans.
Mobile markets appear to be bouncing back
OEMs are expecting to see demand pick up in Q3 and most aren’t making massive changes to their business models or strategies. China and Europe are already on their way to a recovery. Reports also indicate that the new iPhone SE which went on sale worldwide in April, was instrumental in Apple shipping 3.9 million iPhones in China in April, almost eight times more than its February sales.
Xiaomi has reported pre-pandemic level smartphone sales in China since April. The company also reported that by the third week of May, the weekly number of smartphone activations in the European market had returned to over 90% of the average weekly level in January 2020, indicating that the markets are on their way to a semblance of return, which bodes well for other regions currently in lockdown.