Global shipments of smartphones are predicted to shrink by 3 per cent this year amid supply chain disruptions that are partly attributed to China’s faltering economy , which has been slowed by Covid-19 lockdowns , and the war in Ukraine . Total smartphone shipments are expected to reach 1.36 billion units this year, down from 1.39 billion in 2021, according to the latest global forecast from Counterpoint Research published on Thursday. In contrast, smartphone shipments last year rose 4 per cent from 2020’s 1.33 billion total. China’s zero-tolerance approach towards a resurgence in Covid-19 infections, which enforced lockdowns on cities and even entire regions, has slowed down economic activity and caused “a chain reaction across the global economy due to the country’s closed factories and rising logistics costs”, the Counterpoint report said. Vast smartphone assembly facilities, such as those run by Apple contract manufacturer Foxconn Technology Group , are located on the mainland. That assessment reflects continued uncertainty in the smartphone supply chains linked to China even as Beijing moves to ease its rigid Covid-19 control measures. China’s economy showed some improvement in May as coronavirus cases dropped and restrictions eased, but manufacturing and services activity remained in contraction , with future recovery still vulnerable, according to official data. The manufacturing purchasing managers’ index (PMI) in May beat expectations and rose to 49.6 , up from 47.4 in April , according to the National Bureau of Statistics. A reading above 50 indicates production expansion, while a reading below that mark indicates contraction. That reading in May showed that China’s factory activities remain in the worst contraction since February 2020, when the early impact of the Covid-19 pandemic resulted in a PMI of 35.7 . In April, Apple chief financial officer Luca Maestri said in an earnings call that Covid-19-related lockdowns and the global chip shortage would reduce the company’s revenue by up to US$8 billion in the June quarter. Apple had already started to consider reducing its reliance on China , but the recent lockdowns have accelerated the process, according to TF Securities analyst Ming-Chi Kuo. Apple to accelerate reduction in supply chain reliance on China amid lockdowns Other factors that will impact smartphone shipment volumes this year include weak consumer sentiment owing to increased global economic uncertainty and surging inflation amid the prolonged war in Ukraine, according to Counterpoint. Still, the research firm indicated a potential recovery for the global smartphone market in the second half, as economic activity in China picks up. “At the end of May, the Chinese government convened a meeting for large-scale economic stability countermeasures ,” Counterpoint senior analyst Liz Lee said. “The government is expected to implement more aggressive policies to stimulate the economy in the second half.” China’s smartphone market saw its worst-performing quarter in the three months ended March since the Covid-19 pandemic first swept the country two years ago, according to a Counterpoint report in April, citing weak consumer sentiment amid economic headwinds and ongoing coronavirus-related disruptions. First-quarter smartphone shipments in China reached 74.2 million units, down 14 per cent from a year earlier. Chinese Android smartphone vendors Honor, Realme push overseas as domestic sales weaken “We expect smartphone demand to continue to be underwhelming due to weak consumer sentiment and lack of new innovations to stimulate consumers,” Counterpoint research analyst Zhang Mengmeng said in the report. As demand on the mainland contracts , China’s next-generation Android smartphone makers, led by Honor and Realme , are sharpening their efforts in overseas markets to spur new growth, according to separate statements recently made by the two firms’ senior management. Honor was formerly the budget smartphone business of Huawei Technologies Co , while Realme was previously a sub-brand of Oppo . “The macro-environment will impact all smartphone makers,” Honor chief executive Zhao Ming said on Monday.