Coronavirus outbreak could sink China’s smartphone shipments by 30% in Q1, IDC says

Coronavirus outbreak could sink China's smartphone shipments by 30% in Q1, IDC says thumbnail

A pedestrian wearing a protective mask takes a smartphone photograph of an almost empty Nanjing Road in Shanghai, China, on Wednesday, Feb. 5, 2020.

Qilai Shen | Bloomberg | Getty Images

China’s smartphone shipments for the three months ending in March could decline by more than 30% from the same period a year ago, International Data Corporation said on Tuesday.

The world’s largest smartphone market could experience a so-called “Black Swan effect” in the first half of the calendar year due to the new coronavirus outbreak that has killed more than 1,000 people on the mainland, according to the research firm.

A black swan is said to be a rare, unpredictable event with potentially severe consequences.

China smartphone shipments to drop more than 30%

“The coronavirus outbreak impacted the Lunar New Year’s shopping season in late January and is also expected to have adverse effects in the following months,” IDC said in a statement, adding that it expects “China’s smartphone shipments to drop more than 30% year-on-year in 2020Q1.”

The virus outbreak will also “create uncertainty in product launch plans, the supply chain, and distribution channels, in the mid and long term,” IDC said.

Research firm Canalys earlier this month predicted China’s smartphone shipments could drop by as much as 50% between the last three months of 2019 and the first three months of 2020. “Technology vendors are likely to stall marketing activities as they are unlikely to divert attention to new product launches, such as 5G devices,” Canalys said in a Feb. 3 report. “It will take time for vendors to change their product launch roadmaps in China, which is likely to dampen 5G shipments in 2020.”

5G refers to the fifth generation of high-speed mobile internet that aims to provide faster data speeds and more bandwidth to carry growing levels of web traffic. Others have also said that the outbreak could delay China’s plans to roll out 5G services.

IDC pointed out in its Tuesday report that 5G handsets would require lower pricing, better network coverage, and attractive use cases to create a good value proposition for consumers.

New virus strain killed more than 1,000

China’s National Health Commission said there were a total of 42,638 cases of the new coronavirus on the mainland as of Monday night and 1,016 people have died. The deadly pneumonia-like virus was first identified in late December in the city of Wuhan. It belongs to a family of viruses that are known to cause illness ranging from the common cold to more severe diseases such as the 2003 SARS, or severe acute respiratory syndrome, outbreak.

In an effort to contain the disease, China had extended the Lunar New Year holiday, which meant many factories remained shut for a longer period of time. Quarantines and other measures put in place to contain the virus are expected to disrupt the global supply chain as many companies have production factories in China or rely on the country for various components — some analysts have even predicted potential delays in iPhone shipments.

Apple supplier Foxconn was approved to resume production in Zhengzhou, a key manufacturing plant in China, Reuters reported Sunday citing an unnamed source with direct knowledge. The news service said, however, so far only 10% of the workforce has returned, or about 16,000 people. Reuters later reported that a Foxconn plant in Shenzhen was approved to resume partial production Tuesday, according to a source with direct knowledge of the matter.

Impact on the world’s second-largest economy is also said to be significant, which would likely have global repercussions as a result of falling Chinese demand.

IDC also released data on smartphone shipments in China for 2019 — with almost 367 million smartphones shipped in China, there was a 7.5% on-year decline due to market saturation as well as a challenging economy. It was the Chinese market’s 11th consecutive quarterly decline and third consecutive annual fall, IDC said.

By shipment volume, the market leader in China was Huawei, followed by Vivo, Oppo, Xiaomi and Apple.

— CNBC’s Lauren Feiner contributed to this report. 

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