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Smartphone sales could fall in the second quarter, analysts say

China’s smartphone market could decline in the second quarter as the country experiences a resurgence in covid cases, analysts have said. But Apple could very well get away with it, analysts said, as it continues to attract high-end market users.

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The recent rise in Covid cases in China threatens to hurt handset sales in the world’s biggest smartphone market if not contained, but US giant Apple could still hold up well, analysts told CNBC.

On Wednesday, China reported more than 20,000 Covid infections, the majority in the megalopolis of Shanghai. Authorities imposed strict lockdown measures in the city, threatening logistics and consumer spending.

Neil Mawston, executive director of Strategy Analytics, predicts a 20% year-over-year drop in the second quarter for smartphone shipments.

Counterpoint Research partner Neil Shah told CNBC that smartphone sales for April and May could drop 12% to 13% year-over-year.

Sales could pick up again in June due to a huge discount shopping event and as Covid subsides. This could lower smartphone sales in China by 3% to 4%, Shah said. If the Covid situation continues, however, the market could fall as much as 12% year-over-year, he added.

The Android segment in China remains a brutal market, with half a dozen brands (like Xiaomi) battling fiercely over the price of a dwindling piece of the Android pie.

Neil Mawston

Executive Director, Strategic Analysis

Smartphone shipments could fall about 3.4% year-on-year in the second quarter, predicted Will Wong, research director at IDC.

“The impact is expected to come primarily from weak consumer demand and sentiment caused by the Covid outbreak and the economic downturn,” Wong told CNBC. “Supply disruptions will be a less worrying factor as factory bubbles and government experience in dealing with the outbreak could help soften the impact.”

In March, Apple iPhone maker Foxconn briefly had to close one of its main factories in Shenzhen due to Covid. During the Covid outbreaks, China has tried to keep factories running as much as possible to reduce disruption.

Vulnerable Android Gamers

The drop in smartphone shipments in China in the second quarter will be “mainly due to the slowdown in the Android market,” said IDC’s Wong.

Android is Google’s smartphone operating system. Chinese brands offer a modified version. Android phone vendors include Chinese smartphone makers like Xiaomi, Oppo, and Vivo.

“The Android segment in China remains a brutal market, with half a dozen brands (like Xiaomi) battling fiercely over the price of a dwindling piece of the Android pie,” Strategy Analytics’ Mawston said.

However, Apple could very well get away with it. Shah said Apple could see about a 4% to 5% drop in shipments in the second quarter, but that’s partly seasonal as the effect of new product launches wears off. Apple released its latest products towards the end of last year.

Learn more about China from CNBC Pro

Apple continues to benefit from Huawei’s decline in the high-end segment of the market, according to Shah and Wong. Huawei’s smartphone business has been crippled due to US sanctions cutting off the tech giant from key components such as edge chips.

Wong said Apple may actually see positive growth in the second quarter “amid Huawei’s decline and lack of strong high-end competitors.”

Mawston said he expects Apple to really increase its overall market share in China in 2022 “as its loyal and affluent fans transition to newer or more affordable 5G models.”

5G refers to next-generation mobile internet that promises blazing-fast speeds. Apple launched the cheaper 2022 version of the iPhone SE in March that offers 5G.


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