Smartphone Market set for Rebound Year in 2019

Article By : Alan Patterson

Growth projected for next year

TAIPEI — Shipments of smartphones, the mainstay of the electronics industry, are expected to rebound, returning to low-single-digit growth in 2019, according to market research firm International Data Corp. (IDC).

Shipments are expected to grow 2.6% in 2019 after falling by 3% to 1.42 billion units in 2018 from 1.47 billion in 2017, said IDC. Longer term, smartphone shipments are forecast to reach 1.57 billion units in 2022.

Forget, for the time being, the U.S.-China trade war. Emerging markets, 5G, and new product form factors will help revive the smartphone market, according to the market research firm. India is one of the key markets boosting shipments.

“India is definitely on the radar — as of the third quarter in 2018, it has overtaken the U.S. as the world’s second-largest smartphone market,” IDC Associate Research Director Melissa Chau told EE Times. “In 2018, while we still expect China shipments to be roughly three times the volume of India, by 2022, that ratio will shrink to 2:1.”

India is one of the few markets that has not hit maturity and still has a way to go even in 4G adoption, which will help fuel growth, according to IDC.

China, which represented 30% of total shipments in 2017, is showing signs of recovery. While the world’s largest market is still forecast to decline by 8.8% in 2018, IDC anticipates a flat 2019, followed by growth through 2022.

“We don’t expect China to be leading the smartphone growth rebound, especially in light of all the trade war impacts being felt,” said Chau.

Worldwide smartphone forecast by screen size band

China’s slowdown will persist into the first quarter of 2019, according to IDC. The recently lifted U.S. ban on ZTE had an impact on shipments in the third quarter of 2018 and created a sizable gap that is yet to be filled heading into 2019.

Growth expectations are based on emerging markets, but if the U.S.-China trade war escalates, there would be a greater negative impact on the industry, probably ratcheting the outlook down to a flat or declining scenario, according to Chau.

That said, the companies currently benefiting from smartphone growth are the midrange Chinese players like Huawei and OPPO that are targeting maturing markets, she added.

The U.S. is forecast to rebound in 2019 with 2.1% annual growth after shrinking in 2018.

The smartphone market is set to pick up as major suppliers such as Samsung and Apple shift toward larger screens and more powerful devices.

“With many of the large global companies focusing on high-end product launches, hoping to draw in consumers looking to upgrade based on specifications and premium devices, we can expect head-to-head competition within this segment during the holiday quarter and into 2019 to be exceptionally high,” said IDC Senior Research Analyst Sangeetika Srivastava.

In the third quarter of 2018, the 6-inch to less-than-7-inch screen size range stood out with more than four times year-over-year growth. Larger-screen phones (5.5 inches and above) will lead growth with volumes of 947.1 million in 2018, accounting for 66.7% of all smartphones, up from 623.3 million units and a 42.5% share in 2017, according to IDC. By 2022, shipments of these larger-screen smartphones will move up to 1.38 billion units or 87.7% of overall shipment volume.

The normal size of a smartphone has shifted dramatically, and while phone makers stretch the limits with bezel-less devices, the next big switch will be flexible screens, said IDC.

Segment breakdown

Android’s smartphone share will remain stable at 85% throughout the forecast period. Volumes are expected to grow at a five-year compound annual growth rate (CAGR) of 1.7%, with shipments approaching 1.36 billion in 2022. Android average selling prices (ASPs) are expected to grow by 9.6% in 2018 to $258, up from $235 in 2017.

Worldwide smartphone platform shipments, market share and 5-year cagr, 2018-2022

IDC expects price increases to continue through the forecast but at a softened rate from 2019 and beyond. Not only are market players pushing upgraded specs and materials to offset decreasing replacement rates, but they are also meeting consumer needs for better performance.

iOS smartphones are forecast to drop by 2.5% in 2018 to 210.4 million units. The launch of expensive and bigger-screen iOS smartphones in the third quarter of 2018 helped Apple to raise its ASP yet impeded any increase of shipments amid the market slump.

IDC is forecasting iPhone shipments to grow at a five-year CAGR of 0.1%, reaching volumes of 217.3 million in 2022. Apple will continue to lead the global premium market segment, according to the IDC forecast.

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