Slowed demand for smartphones and Covid shutdowns in China have continued to hurt the smartphone market, not likely to see a recovery until mid-2023, analyst firm IDC said Friday.
“Everybody in the industry is worried and nobody takes this downturn in stride with so much uncertainty,” said analyst Ryan Reith in an interview. “It’s a tough situation right now with the war in Ukraine and China lockdowns a huge impact. The strength of the dollar doesn’t help anyone outside the US now.”
Despite layoffs at some of the biggest companies, the attitude of smartphone and PC makers is “they will make it through,” Reith said. “We at IDC have full belief that smartphones will recover. They still remain a priority for consumer purchases, ahead of PCs, tablets and consumer TVs.”
IDC reported on Friday that shipments of iPhones and Android phones from various vendors will drop 9% year to year in 2022, analysts said. IDC had previously forecast a 6.5% reduction for all of 2022, but low demand and accumulated macroeconomic disruptions forced the revision further downward. For 2022, 1.24 billion smartphones will ship, IDC forecast.
For 2023, IDC has also cut its forecast by 70 million smartphones, although it projects 2.8% growth based on a recovery in the latter part of the year. While 2022 is expected to be down 6.5%, 2021 was up 6% after a 12% decline in 2020.
Amid the dreary forecast and economic headwinds, IDC said there has been growth in the high-end smartphone market, partly due to promotional activity, trade-in offers and financing plans. Smartphone buyers in many countries, including several in Europe, have only recently begun to have the ability to finance a $1,000 high end smartphone over three or four years, instead of paying up front. Financing plans have been widely used in the US for nearly five years.
Reith said a high-end smartphone can cost $800 or more in the US, while in India a $300 smartphone would be considered high-end, compared to the average cost of $150 there. Overall, average selling prices have continued to increase and will reach $413 in 2022, up 6% from $388 in 2021. ASPs were above $400 in 2011, a year when smartphone shipments grew 60% over the prior year.
Apple iPhones will make up 18.7% of all smartphone shipments in 2022, the highest share of any year, which helps drive ASPs higher, said analyst Anthony Scarsella.
The US dollar’s strength means a new iPhone 14 Pro Max will sell for $1,600 in the US, but cost 40% more in some countries, or about $2,240.
Reith said supply shortages hurt PCs and smartphones a year ago, but since then demand has slowed while phone makers see the cost of goods significantly higher of late. In the last year, several Chinese smartphone makers pulled back production partly because they saw sales disrupted due to Covid impacts there.
IDC’s long-term optimism for smartphones is based on several factors, including continued deployment of 5G wireless networks, which are not as advanced in Africa and South America as in other regions.Growth in 5G infrastructure will be robust in India, Indonesia and the Middle East for the next five years and in Africa and South America in five to 10 years.
In 2022, half of new smartphones shipped are 5G-capable, a percentage expected to rise to 80% by 2026. Meanwhile, foldable phones like the Samsung Galaxy Z Fold4 and Flip4 make up 1%- 2% of the market in 2022 (16 million smartphones), but will continue to grow as costs decrease and more phone makers offer foldables.
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