Credit Suisse predicts steep fall in global smartphone output as demand and China economy slow
- Credit Suisse analysts warn ‘the bottom is not yet in sight’ for global smartphone production levels after predicting 19 per cent drop in first quarter
Global smartphone production in the first quarter of this year is expected to drop 19 per cent as major handset makers feel the effects of softer demand and weak consumer sentiment in China, according to a technology research report from Credit Suisse.
Production volumes are expected to slow at Apple, Samsung Electronics and Chinese smartphone makers and “the bottom is not yet in sight", according to Credit Suisse analysts, who revised down a previous forecast for a drop of 14 per cent to 19 per cent.
Output of Apple’s iPhones is expected to drop 40 per cent sequentially for the January to March quarter, while component makers are forecast to see a fall in demand of at least 50 per cent over the same period, according to the report.
The weak forecast for the global smartphone market comes after a series of disappointing revenue outlooks from some of the world’s biggest handset makers. Apple and Samsung both posted weak earnings reports in recent months, blaming weaker demand in China where the economy is slowing amid a trade standoff with the US.
However, Chinese smartphone brands such as Huawei Technologies, Xiaomi Corp and OnePlus have also been gaining share at the expense of Apple and Samsung, with higher specification models and lower prices.
Huawei said in December it was on track to ship 200 million smartphone units in 2018 thanks to rapid growth in the past three quarters. Huawei surpassed Apple in both the second and third quarter of 2018 to become the world’s second-largest smartphone vendor behind Samsung and its smartphone division is now approaching the revenue contribution seen from its core telecoms equipment business.
Apple lowered its production plans for the iPhone in the last week of December and cut its earnings guidance for the holiday quarter from US$84 billion to US93 billion to US$84 billion in early January, blaming a weak Chinese economy.
“Most of our revenue shortfall to our guidance, and over 100 per cent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” Apple chief executive Tim Cook said in a letter to shareholders.
Samsung also posted a lower-than-estimated profit for the fourth quarter ended in December, with operating income down 29 per cent to US$9.7 billion due to falling demand for its smartphones in China and components, such as memory chips and screens it produces for other companies.
The South Korean technology giant shut one of its two mainland mobile phone factories in December, after a decline in market share in the country from No. 1 with 20 per cent in 2013 to less than 1 per cent in 2018.
