With economic activity virtually at a standstill around the world, the prospect of a global recession seems inevitable. For some smartphone manufacturers, the timing couldn’t be worse.
Can the market survive in its current form? Who wins and who loses? And what will the future look like?
The idea of a recession hitting the smartphone industry is not new. In fact, I wrote an article in November 2018 in which I explained that the smartphone industry was in recession.
At the time, I was basing it on the decline in phone sales. So how can a declining industry survive a global recession?
Innovation Has Been Stagnating For Years
One of the main reasons for the decline in smartphone sales is the fact that people are keeping their devices longer and longer. We know this is the case because of the transfer of mobile data between the old and new device.
The days when we used to update our phones every two years according to our operators’ plans are slowly fading away. Consumers today are much more comfortable buying unlocked phones, at least in Europe.
Then there is the lack of innovation in the telephone industry. It’s much easier to keep your old phone when the new version looks, feels and performs the same, isn’t it?
The two big hopes for innovation are the possibilities opened up by foldable screens and 5G connectivity. These two areas are certainly exciting, but they are only very recent.
Foldable displays are struggling to make their mark in terms of durability and value for money, while 5G is only a reality in some parts of the world at the moment.
We’ve reached the bizarre stage where Apple can launch a redesigned iPhone 8 – a 2017 phone – with an A13 Bionic on board, and everyone’s raving about the concept.
The return of the Home button is nostalgic, but the main feature of the new iPhone SE 2020 is its price, and that’s not something we’re used to seeing from Apple.
Supply chain and manufacturing disruptions in the industry, as reported in the Wall Street Journal this week, are likely to go hand in hand with a decrease in consumption.
Global smartphone shipments are expected to fall by 15% this year, but I don’t see a major problem with supply not being able to meet demand. Real innovation is needed if manufacturers want to sell flagship phones again in large quantities.
But innovation costs money and involves risk – the two things that companies tend to seek to reduce in times of recession.
We Are Already Seeing The First Signs of Change
Earlier this week, OnePlus announced plans for its European restructuring. Organisational changes in Germany, France and the UK will enable the Chinese manufacturer to reduce its workforce.
Instead, the company will focus on the opportunities offered by the Nordic region and the Benelux countries. According to a statement from OnePlus, the restructuring is aimed at “better streamlining our operations while continuing to meet the needs of our growing community”.
The announcement comes just weeks after the launch of the brand’s most expensive range of smartphones ever, the OnePlus 8 and 8 Pro.
Meanwhile, Xiaomi enters the $1,000 smartphone arena with its new Mi 10 Pro and Motorola returns to the title race with its new Edge+.
These new smartphones were developed and planned before the COVID-19 epidemic. The economic consequences of a global pandemic were obviously not part of the launch plans. But for those looking to move up the smartphone market ladder, the timing is really bad.
However, the news is more positive for less well-known manufacturers in the traditional mid-range market. Brands such as Realme, Vivo and Oppo could flourish in the new world order.
Vivo now sells more smartphones in India than Samsung. Apart from those living in our technology bubble, the brand is virtually unknown in Europe and North America.
As the operators’ stores around the world are currently closed, consumers are no longer subject to the sales arguments of commission-based staff.
Forced to search online to find the right shoe for them, consumers will be able to seize new opportunities by discovering manufacturers who charge lower prices than their rivals while providing similar equipment.
Manufacturers that don’t have a strong presence in mainstream stores and are now sitting on virtual shelves right next to the big boys from Apple and Samsung. This can only be a good thing.
The Future Remains Uncertain
I opened this article with a question: Can the smartphone market survive a global recession? And the answer is yes.
Smartphones are not going to disappear and will remain the technology device most used by the majority of the world’s population.
However, no one knows what the market will look like when we finally get out of this difficult situation.
All manufacturers will be scrambling to find their place in an unstable and ever-changing market. Traditional monopolies could be dismantled by then.
I have not even mentioned the place of Huawei – a company going through its own transition period, which we have covered extensively in the previous weeks.
Who knows what the future will look like?
One thing is certain, however, in the words of the great Bob Dylan: times are changing.
