Europe and North America saw an overall decline in smartphone sales in Q2 2020 as stores remain closed and recovery was slow.

Sales declines in April, which was the hardest hit, were offset by an uptick in June, as stores reopened across Europe and the US But China reported declining smartphone sales in both May and June 2020. According to the China Academy of Information and Communications Technology (CAICT), a state-backed think tank, YoY smartphone sales dropped 10% in May to 32.6 million, and 16% in June to 27.7 million, after a jump of 17% in April to 40.8 million phones. The prognosis for July was even more melancholy. Smartphone sales plunged 35% in July in China YoY.

Seasonality may be a factor in smartphone sales dip

However, Covid-19 is not the only culprit for a fall in sales. China is a highly saturated mobile market that has struggled with growth in recent times. The slump in sales, especially in July, could also be an effect of seasonality, as consumers typically wait out the Autumn, expecting an iPhone launch cycle followed by holiday promotions. But fluctuating sales indicate that markets will take longer to reach pre-pandemic level sales, and the holiday season is a key period for both OEMs and carriers across regions to improve revenues and profitability.

Covid-19 affected Apple’s product sales, but its bottom line remained steady for the most part.  Apple saw a 12% quarterly profit growth in Q2 2020 to $11.25 billion. Apple’s hardware helped its Q2 results, especially its Macbooks and iPads, which got a boost due to remote working and learning. Apple’s smartphone revenues showed an uptick of 1.6% YoY to $26.42 billion, thanks to a strong iPhone 11 upgrade cycle across all regions and the iPhone SE launch, which demonstrated that new phones at the right price can still drive sales even during a pandemic. But even a company the size, scale and cash of Apple was not immune to the effects of the economic backlash of the pandemic.

Apple’s smartphone revenues were down 8% in Q2 2020 compared with Q1 2020, as the iPhone SE struggled to get a head start due to store closures in April and early May. Store closures will continue to affect smartphone and wearable sales. However, if June is any indication, we will see an uptick in sales of the iPhone SE as stores gradually reopen across the United States.

Huawei expecting a difficult year

Huawei did not report its Q2 earnings separately, instead choosing to report half yearly numbers, which could indicate less than stellar Q2 earnings. Huawei had revenue growth of 13.1% YoY to $64.88 billion in 1H 2020, and a net profit margin of 9.2%, an uptick from 8.7% YoY. Huawei did not disclose the number of smartphones it sold in Q2 or Q1.

Huawei’s 5G phones have also aided its bottom line in China, with aggressive backing by carriers and OEMs in terms of marketing and promotional dollars, along with discounts on phones and service plans. Companies are shying away from giving guidance for the coming quarters, and Huawei is no different. The company has gone on record to say that 2020 will be its most difficult year because this is the first full year with US sanctions which ban Huawei from selling smartphones in the US and from using American technology to design or manufacture its semiconductors that are needed in phones and TVs.

Huawei’s European phones also do not offer Google’s Play Store or key apps, and they also cannot use any of the APIs that are needed for the backend applications of popular consumer apps, rendering them impractical in Europe. With the added effects of Covid-19, Huawei will lose sales to rivals, especially in Europe as lockdowns ease and phone sales pick up.

Covid spreads fiscal uncertainty

Samsung’s smartphone sales were weak in Q2 2020, but the company still reported a 23% YoY growth in operating profit to $6.81 billion. Marketing cost reductions and other cost optimizations aided Samsung’s profit earnings. But overall revenues in Q2 2020 dropped 6% YoY and 4% QoQ due to lower sales of its consumer devices like smartphones and TVs.

Although Samsung’s smartphone sales declined (the company did not report any sales numbers for Q2 2020), its Galaxy S20 phones sold well enough to aid its profit growth. Samsung has defied the pandemic with sales of the premium Galaxy S20 and costly home appliances. However, this trend is unlikely to continue as the fiscal uncertainty around Covid will prevent continued sales of high priced products, and home appliances have a higher shelf life compared with phones.

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