Smartphone shipment estimates have been slashed for the second time this year. The global shortage of semiconductor chip and logistical issues as Chinese ports and airports continue their restrictions have contributed to the decline in shipment.
The International Data Corporation (IDC) has predicted a 5-10 percent dip in smartphone shipments and TechArch also cut down its previous projections by 7 percent. This move is on the heels of the earlier downgrade in May, where forecasts were reduced from 16 percent to just 1 percent growth or even no growth. The previous downgrade was made on the basis of the resurgence of COVID-19 cases and the renewed imposition of curbs and restrictions in many parts of the world.
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Slower shipments can jeopardise sales figures for the festive season when the industry makes the bulk of its revenue. The festive season with its numerous sales across digital and retail platforms manages to contribute nearly 33 percent of the smartphone industry's annual sales figures. Firms are estimating a shortfall of 5-15 percent in the smartphone inventory of mass segment brands.
"We were expecting sales of 152-155 million smartphones for 2021. However, with ongoing supply chain issues, we expect brands falling short of 5-15% in meeting their targets for the year,” TechArc founder Faisal Kawoosa told the Economic Times.
Logistical issues are also going to drive up the prices of smartphones by up to 5 percent, which might contribute to lowered sales as well.
“If it continues in September, we are staring at a 5-10 percent drop in shipment of handsets,” said Navkendar Singh, research director, IDC.
Even with lowered sales, 40-50 percent increase in shipping cost due to Chinese curbs and semiconductor shortages, the group does forecast a single-digit overall growth for the sector.
The recent restrictions on Chinese freightways have compounded existing issues like a slow upturn, rising material cost, and the growing shortage of semiconductor chipsets.
Smartphone shipments already fell by 32.4 million units just between the first and second quarter of FY21, a decline of 13 percent. Xiaomi and Samsung remained the market leaders with 29 percent and 17 percent market share respectively.
“India will rebound in the second half of 2021, aided by accelerated vaccinations, as well as brands expanding promotional activities and new product releases,” said Canalys Analyst Sanyam Chaurasia.
But the second half will not see a surge in pent up demand like last year, he added. “The threat of a third wave still looms in India, but as citizen behaviour and industrial operations continue to adapt to pandemic conditions, its impact should be minimal. Increasing costs will be challenging, amid limited component supply, rising shipping charges and a tough macroeconomic environment. In the short term, vendors will bear the impact of supply chain disruption and will be conservative about raising prices. But the component shortage also brings another risk – regional deprioritization – as brands look to allocate their limited supplies of devices to more lucrative markets,” Chaurasia added.
The effects of the pandemic will diminish in key logistical regions reducing the freighting burden on smartphone makers, and the demand is also expected to bounce back. However, the shortage of semiconductor chip is not expected to resolve anytime soon. The global shortage has caused production issues in industries like computer parts manufacturing, automobile manufacturing, aviation, and electronics.
With the current demand far outstripping the possible supply, the chip shortage is expected to only start correcting itself by late 2022. However, further disruptions due to COVID-19 related restrictions in either Taiwan or countries with global silicon production can further exacerbate the shortage.
(Edited by : Aditi Gautam)
First Published: IST