The first quarter of this year is projected to be a dull one for handset makers, as the sharp rise in Covid-19 cases could worsen a component shortage that has forced companies to limit production. The surging cases and fear over the fast-spreading Omicron variant could also hurt consumer sentiment and affect demand, industry analysts said.
Shipment of phones in the January-March period is expected to drop by 20% from the quarter’s average of 54-55 million, as per initial analyst estimates. Smartphone shipment is likely to fall 11-14%.
In a bid to rationalise usage of components amid the continuing shortage, “brands which are strong in a particular segment will attempt to get 80-90% of their shipments in that segment”, said Faisal Kawoosa, founder of research firm Techarc.
Brands will restrict shipments to 50-60% in any new segment they are planning to tap, to avoid inventory pile up amid fears that the rising Covid cases may also limit demand, he said.
The research firm estimates the total shipment for mobiles in the January-March quarter to be near 43-44 million. For smartphones, the shipments are likely to be 30-32 million against the average of 35-36 million for the quarter.
These estimates come on the back of an increase in Covid-19 cases globally. A fresh round of restrictions imposed in China and Hong Kong has started to worsen an already fractured supply chain of components. The Omicron and Delta variant spike will also force consumers to stay away from buying expensive smartphones, said IDC.
“Saving mode will be on for consumers, unlike 2021 when one did not expect a second wave to hit. However, in this case, some inventory build-up may happen as people become more careful spenders keeping Omicron and its impact in mind, cautious of a third wave,” said Upasna Joshi, associate research manager at IDC India.
Industry watchers expect handset launches to get impacted, with just 45 rollouts this quarter. In comparison, 60, 46 and 67 phones were launched in the January-March quarter of 2019, 2020 and 2021, respectively. The number of launches in 2020 was low on account of the pandemic setting in and 2021 was unusually high because of pent-up demand.
Meanwhile, a chipset shortage has forced handset brands to focus on 5G phones, keeping future use in mind.
“Vendors are prioritising models looking at the availability of chips in the market and will look to push towards the 5G side, with the shortage looking around 4G chips,” said Sanyam Chaurasia, analyst at technology market research firm Canalys. Brands such as Realme, Xiaomi, Samsung and Oppo will be pushing towards the affordable side of 5G this year, Chaurasia added.
January-March is typically the leanest quarter for handset sales with a majority of sales happening during the festive season starting Diwali and ending December.
Canalys estimates the chip shortage scenario to continue in the first half of this year and vendors to look to launch new models according to the availability of components. It said 2022 will close with 179 million shipments, compared with 163 million in 2021. New India Life