What are the Reasons Behind the Decline in the Global Smartphone Shipments?

The whole world is witnessing a global recession and spiraling inflation. There are a number of reasons for it.  The supply chain disruptions and closures from Covid 19 is one of the main reasons. Other reasons include higher interest from the US and strengthening dollar, high fuel prices, etc. In this regard, the mobile industry is also experiencing shocks. According to a recent report from IDC (International Data Corporation), global smartphone shipments decreased 8.7 percent year over year in the second quarter of 2022 (2Q22). This is the fourth consecutive quarter that the smartphone market has declined, as shipments fell to 286.0 million units, roughly 3.5% less than anticipated.

As anticipated, Central and Eastern Europe (CEE) experienced the greatest loss in the second quarter, with a year-over-year reduction of 36.5% as the war in Ukraine continues to negatively impact the region.

However, in terms of volume, CEE only accounts for 6% of worldwide shipments, therefore China’s 14.3% year-over-year fall accounted for the largest decline in global volumes. Asia/Pacific (excluding Japan and China) (APeJC), which accounts for over half of all global shipments, also dropped by 2.2% in the second quarter of 22. All regions outside of Canada had losses in the low to mid-single digits.

“What began the year as a supply-constrained business is now a demand-constrained market,” said Nabila Popal, research director with the Worldwide Tracker team at IDC. “While the supply improved as capacity and production were ramped up, soaring inflation and economic uncertainty have stifled consumer spending and raised inventories in all regions. OEMs have reduced orders for the remainder of the year, with Chinese suppliers reducing orders the most as their largest market continues to struggle. Although we anticipate that demand will begin to increase in some places by the end of the year, the smartphone market forecast for 2022 will be revised downwards. We continue to believe that any drop in demand now is only pushed into the future.”

Despite the tough environment, Samsung dominated the market with a market share of 21.8% and good growth in all regions except Europe. Apple came in second with a minor growth in market share. However, all other major brands including Xiaomi, vivo, Oppo, etc. witnessed negative growth as you can see in the aforementioned table.  So the overall drop in global shipment was 8.7%.

Causes for Decline in global smartphone shipments:

Fuel cost:

The exorbitant rise in the prices of fuel is one of the major factors for the decline in global smartphone shipments. The international price of oil is on the rise for months due to which the shipment costs have increased multiple times. Moreover, the fuel prices have affected the services sector. The liabilities have become doubled and earnings are less. That’s why due to less production, there is a low supply of smartphones. Because of these reasons, we are witnessing a gap in worldwide smartphone shipments.

Global Recession and spiraling Inflation:

For the past six months, the global recession and spiraling inflation have affected almost every individual on the planet. Stocks of all companies around the world have plummeted. Furthermore, the prices of commodities have also increased a great deal which has seriously affected the salaried class. Thus, the purchasing power of individuals has gone down. Furthermore, because of the recession, many governments around the world (as in Pakistan) have put extra levies on businesses and individuals which has further added to the miseries. So this is another reason why worldwide smartphone shipments have seen a decline.

Dwindling Demand:

As we mentioned above, the global market has become demand-constrained. There is a dramatic decrease in demand in Asia pacific and in central-eastern Europe. However, the decline in demand in the Chinese market is the largest contributor to the low smartphone shipments. Unfortunately, we do not hope that the demand would increase in the near future till the global recession persists.

Increase in phone prices:

As the production costs increase so do the overall prices of the devices and smartphones. The combination of higher prices of smartphones and low purchasing power has hit the sales of smartphones to a deal. For example, the new iPhone 14 will expectedly launch at $799 (base variant). So if the same situation continues, we don’t think that the new iPhone will be able to beat its predecessor in terms of sales.

Supply gaps due to the Ukraine war:

The supply gaps that have emerged because of the Russian-Ukraine war is another reason for the decline in global smartphone shipments. Russia is under huge sanctions from the west so no smartphone shipments can be sent to the Eurasian country. Furthermore, many trade routes have also been affected due to which the supply has halted, and sometimes shipments have to be made for larger routes which incur extra costs.

All of the aforementioned reasons can be attributed to the decline in worldwide smartphone shipments.

Note:

All of the data including stats and figures are taken from IDC, which is a credible source. So if you like our blog, or have any queries regarding it, do mention them in the comment section!

Check out? realme Earns the Honor of Becoming the Youngest Brand among BrandZ’s Chinese Global Brand Builders TOP 50 Awarded by Google and Kantar