Bitter US-China Trade Ties Likely to Hit 2019 Smartphone Shipments

Since most of the smartphone brands rely on the Chinese labour to assemble and manufacture their devices, the trade war between China and the US can hit 2019 shipments of smartphones world over.

Canalys, a leading smartphone and technology channels research firm, releases its forecast on global smartphone shipments, and it doesn’t paint a rosy picture for any brand.

According to Canalys, smartphone shipments will reach 1.35 billion units in 2019, which is a 3.1% decline year-on-year. This decline is due to “uncertainties surrounding the US-China trade talks.

Smartphone Shipments to Reach 1.35 Billion in 2019

following the US Executive Order signed on May 15 and other developments, Canalys has reduced its forecasts to highlight an uncertain future.

“Canalys’ base assumption is that restriction will be imposed stringently on Huawei, once the 90-day reprieve expires, having a significant impact on its ability to roll-out new devices in the short term, especially outside of China.”

The research firm anticipates that “Huawei is taking steps to mitigate the effect of component and service supply issues, but its overseas potential will be hampered for some time. The US and China may eventually reach a trade deal to alleviate the pressure on Huawei, but if and when this will happen is far from clear.”

According to Nicole Peng, VP, Mobility, “It is important to note that market uncertainty is clearly prompting vendors to accelerate certain strategies to minimize the short- and long-term impact in a challenging business environment, for example, shifting manufacturing to different countries to hedge against the risk of tariffs. But with recent US announcements on tariffs on goods from more countries, the industry will be dealing with turmoil for some time.”

Rushabh Doshi, who is a research director at Canalys, is of the opinion, “We expect the other major smartphone vendors will have short- term opportunities while Huawei struggles. Samsung will be the biggest winner, thanks to its aggressive device strategy and its ability to quickly ramp up production, through the Korean firm may struggle to entirely fill the shortfall.”

Doshi also added, “It will take other vendors until late 2019 to react to the new opportunities. Samsung’s control over component supply gives it a major advantage.”

While smartphone shipments in 2019 are likely to be lower, the next year, 2020 is expected to see some movements as 5G, and other hardware innovations will be positive drivers for consumer demand and smartphone shipments globally are expected to return to soft growth, rising 3.4% to 1.39 billion.

Canalys expects major supply chains and channels to be prepared with some contingency plans to alleviate Huawei’s decline.

Doshi further added, “Smartphone fatigue and a lack of meaningful innovation are still major market forces. Consumers are holding onto phones for longer. But as device lifecycles move toward a new equilibrium point, the rate of quarterly shipment decline will ease.”

Summing up…

This forecast presents some threats to assemblers and manufacturers of smartphones in China. Consequentially, labour-intensive industries will also be hit by bitter relations between two giant nations.

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Image Credit: Fortune