Covid-19: Impact of second wave on mobile sector
As India battles with the second and, more severe wave of Covid-19, the mobile sector is also getting impacted by it. The pandemic brings changes to all businesses, and mobile sector is no exception. However, everyone is learning to sustain in this new normal and are adopting new methods to minimize its impact and modify their plans accordingly.
It has been more than a year since the Covid-19 pandemic penetrated the deepest core of human civilization. the novel coronavirus outbreak has demonstrated the critical importance telecom plays in keeping governments, societies and businesses connected and running. unarguably, the pandemic brings changes to all businesses, and mobile sector is no exception. While many technology sectors, such as cloud services, have excelled amid the pandemic, the mobile sector has not. For the mobile phone industry, the first quarter of 2020 has represented a historic low. In India, after the first wave, we thought that we have gained control over the situation, but the second wave continues to cause substantial economic effects on mobile companies.
a research reports a 13 per cent yearover-year loss in first quarter for the mobile phone market, the fastest decline in history. From production issues to changing demands - this sharp drop is the result of many factors. While not all the changes are consistent, several companies are struggling with similar problems. as the world adjusts to and recovers from novel coronavirus, the mobile sector should maintain in the
long term, but at the moment, it faces new challenges on multiple fronts.
Falling demand for new phones
Of all the Covid-19 effects on the industry, the most notable is the falling demands for new smartphones. It is not that the virus has contributed mobile phones less useful, but the ensuing recession changes the priorities of the customers. In the situation of economic distress, people won’t likely buy a new mobile phone unless they actually need one. according to a research report, India’s mobile phone sales fell over 13 per cent in the second quarter as the second wave of Covid-19 pandemic affect demand in the number 2 smartphone market. However, online cell phone purchases helped sales surge 87 per cent compared with a year earlier, according to the market research firm Canalys. according to the report, China’s Xiaomi continued to be the top brand favoured by the buyers in India with a 29 per cent market share, followed by south Korea’s samsung at 17 per cent share. as the threat of a third wave still looms in India, industrial operations and customer behaviour will continue to adjust to pandemic conditions, helping reduce the impact.
Smartphone production records the largest decline due to pandemic
In the mobile sector, smartphone sales are not the only falling numbers right now. the manufacturers of mobile phones have rolled back production in light of the deadly virus. Declining revenue as well as lockdowns over health concerns has severely hindered the production of mobile phones. according to Korean news source, the monthly production of samsung has been reduced to roughly 10 million units in april 2020, less than half of its average monthly output. as factories in Brazil and India shutdown during the lockdown, they would not be able to maintain normal levels of production even it were economically viable.
s N Rai, co-founder, Lava International, has been quoted as saying, “the situation is certainly challenging in June 2021 quarter. though some firms, including ours, could carry on production in april because of buffer component stocks, not all companies were able to do it. May, so far, has been disastrous for all, as the disease spreads and lockdown curbs remain intact. at an industry level, therefore, the hit to business is easily 50 per cent.”
Many sources reported a 50 per cent cut in production of iphones at Chennai facility of Foxconn due to a wave of Covid-19 at the factory. Foxconn is contract manufacturer of apple in India. It also produces smartphones for Xiaomi in the country.
The changing market shares of manufacturers
according to a data, the report indicates some shifts within the mobile phone market shares. all smartphone manufacturers and vendors are experiencing an economic drought, but not all are experiencing equally. In quarter 1 of 2019, the south Korean tech giant, samsung had a 21 per
“The situation is certainly challenging in June 2021 quarter. Though some firms, including ours, could carry on production in April because of buffer component stocks, not all companies were able to do it. May, so far, has been disastrous for all, as the disease spreads and lockdown curbs remain intact. At an industry level, therefore, the hit to business is easily 50 per cent.” – S N Rai, Co-founder, Lava International
cent market share, which has dropped to 20 per cent in quarter 1 of 2020. While the share of samsung dropped, Huawei’s remained same, and apple’s increased by 2 per cent. Between 2019 and 2020, these companies report fewer shipments but the decline is disproportionate between them. as the pandemic continues, it could cause more notable changes in standing in the cell phone market.
Navkendar singh, research director at IDC India, has been quoted saying, “the recovery in calendar year 2021 might not be as smooth as expected earlier, with uncertainty around the lasting impact of the second wave and a possible third wave in the next few months.”
Second wave impact on smartphone shipments
Due to closure of both online and offline sales channels and tepid consumer demand, smartphone market in India has contracted by 15-20 per cent sequentially in the april-june. according to preliminary numbers shared by leading market trackers including International Data Corporation (IDC), Counterpoint Research and Cybermedia Research (CMR), the second quarter recorded 30-32 million mobile phone shipments, down from all-time high first quarter shipments of 38 million. Due to the pent up demand, a fast-paced recovery in June supported quarterly shipments after april and May were practically washed out, experts added.
“Localised lockdowns, a semiconductor shortage, and a surge in Covid-19 cases at factories have led to a slowdown in mobile phone manufacturing and sales in april-may”, heads of several companies quoted saying.
Rising usage of smartphones
Despite the dropping sales figure and production, the usage of mobile phone is experiencing higher levels than usual. several businesses now rely on instant messaging and people in quarantine spend more time on social media platforms. amid the ongoing pandemic, mobile phones have become a more prominent asset than ever before. the increased usage can translate to small financial gains for mobile phone companies. accessories purchases and app sales could likely rise and mobile service providers certainly benefit from growing data consumption. However, these gains do not represent enough profit to offset the declining sides of the market.
5G faces setbacks
Before the Covid-19 pandemic, the mobile sector was all ready to bring 5g technologies and networks in the Indian market. But with the shrinking market and declining revenue, this shift is less likely to take place soon. Companies like apple and Verizon have already delayed their upcoming releases of 5g smartphones and services. In manufacturing, 5g may experience the opposite effect as the benefits of Internet of things (Iot) become more prevalent. In light of the virus, to sustain their increasing automation, more manufacturers could adopt 5g services. On the other hand, consumer adoption won’t happen as soon as companies initially thought.
analysts at Omdia quoted as saying, “With the epidemic arriving at dawn of 5g’s mainstream deployment phase,
the coronavirus has the potential to
“The recovery in calendar year 2021 might not be as smooth as expected earlier, with uncertainty around the lasting impact of the second wave and a possible third wave in the next few months.” – Navkendar Singh, Research Director at IDC India
disrupt the progress of the next-generation wireless standard, as the crisis slows or threatens to slow the production of key smartphone components, including displays and semiconductors.”
Companies could move mobile phone manufacturing out of China
after the trade war fallout, the Covid-19 pandemic is another reason for smartphone companies to reassess their reliance on the Chinese manufacturing sector. Reportedly, many companies are planning to depend less on Chinese factories. as per the reports, google, in thailand, has commissioned factories to make some of its smart home devices. also, Lg has moved the manufacturing of its mobile phones from China to Vietnam.
Kearney, a research firm, quoted saying, “It is feasible that many more companies will move manufacturing of modules and finished goods out of China. However, moving the entire component supply chain out of China could prove to be more difficult. Components are a singular choke point as components are a necessary ingredient in modules and finished goods assemblies. this is very hard to move, as it requires entire ecosystems.”
the Covid-19 outbreak will only accelerate the trend to make mobile phones, and indeed many other electronic products, out of China. the mobile sector could also be a key factor to treating and reducing the spread of novel coronavirus infections. Many researchers and governments are investigating ways to use smartphones of the people to determine whether or not they have been exposed to the virus and alert them to get tested and get isolated if possible. However, when it comes to app that tracks and reports the location of the users, there are remarkable concerns around privacy that need to be addressed to get both phone manufacturers and consumers on board. google and apple – both are the strong proponents of decentralized contacttracing apps that protects the privacy of the users by keeping as much data as possible on users’ smartphones rather than in a government-controlled server. the Covid-19 pandemic has not been kind to most of the mobile phone sectors, but it is not enough to end it. Because of the social and economic disruption caused by the pandemic, people across the world rely on technology for information and working from home. the major Covid-19 related restrictions such as quarantine requirements and stay-at-home orders, smartphones are undoubtedly recognized as an essential service. In today’s digital world, which is constantly increasing, the smartphones have become less of a luxury and more of a necessity. this factor itself is an indication that mobile manufacturing and sales can witness a V-shaped recovery once the market picks up. ■ shweta@mymobileindia.com