China’s smartphone market may fall in the second quarter as the country experiences a resumption of Covid cases, analysts said. But Apple can do quite well, analysts said, as it continues to attract high-end consumers to the market.
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The recent rise in Covid cases in China threatens to hurt phone sales in the world’s largest smartphone market if left unchecked, but US giant Apple may still be doing well, analysts told CNBC.
On Wednesday, China reported more than 20,000 people infected with Covid, most of them in the metropolis of Shanghai. Authorities there have imposed tough measures to block the city, threatening logistics and consumer spending.
Neil Mouston, CEO of Strategy Analytics, forecasts a 20% year-on-year decline in the second quarter of smartphone shipments.
Neil Shah, a partner at Counterpoint Research, told CNBC that smartphone sales in April and May could fall 12% to 13% year-on-year.
Sales may increase in June due to a huge discount shopping event and as Covid fades away. That could reduce smartphone sales in China by 3% to 4%, Shah said. However, if the situation with Covid continues, the market could fall to 12% on an annual basis, he added.
The Android segment in China remains a brutal market, with half a dozen brands (such as Xiaomi) vying for the price of a piece of shrinking Android pie.
Neil Mouston
CEO, Strategy Analytics
Smartphone shipments could fall about 3.4 percent year-on-year in the second quarter, predicts Will Wong, head of research at IDC.
“The impact is expected to come mainly from soft consumer demand and sentiment caused by the Covid outbreak and slower economic momentum,” Wong told CNBC. “Supply disruptions will be less of a concern, as factory bubbles and the government’s experience in curbing the epidemic could help mitigate the impact.”
In March, Apple’s iPhone iPhone assembler Foxconn briefly had to close one of its main factories in Shenzhen due to Covid. During the Covid epidemic, China tried to maintain factories and work as hard as possible to reduce disruptions.
Android players are vulnerable
The drop in smartphone shipments in China in the second quarter will be “mainly due to weaker momentum in the Android market,” Wong of IDC said.
Android is Google’s smartphone operating system. Chinese brands use a modified version of them. Suppliers of Android phones include Chinese smartphone makers such as Xiaomi, Oppo and Vivo.
“The Android segment in China remains a brutal market, with half a dozen brands (such as Xiaomi) vying for the price of a piece of shrinking Android pie,” said Mouston of Strategy Analytics.
However, Apple can do quite well. Shah said Apple could see a drop of about 4% to 5% in shipments in the second quarter, but this is partly seasonal as the effect of launching brand new products fades. Apple released its latest products late last year.
Apple continues to benefit from Huawei’s decline in the premium market, according to Shah and Wong. Huawei’s smartphone business has been crippled by US sanctions that cut the technology giant from key components such as cutting-edge chips.
Wong said Apple could actually see positive growth in the second quarter “amid the decline of Huawei and the lack of strong high-end competitors.”
Moston said he expects Apple to actually increase its overall market share in China in 2022, “as its loyal, wealthy fans upgrade to new or more affordable 5G models.”
5G refers to the next generation of mobile internet, which promises super fast speeds. Apple released the 2022 version of the cheaper iPhone SE in March, which offers 5G.