The market for smartphones is forecast to decline 9.5% year-over-year in 2020, reaching a total of 1.2 billion units, according to new research from International Data Corp (IDC).
The good news is that the decline will be short-lived as IDC forecasts a strong push into 5G in 2021 and a full recovery by 2022, managing a compound annual growth rate (CAGR) of 17% over the next five years driven mostly by the assumption that the smartphone will be the computing platform of choice for consumers.
"5G remains a priority for all smartphone OEMs despite the challenges with the COVID-19 pandemic and lack of consumer demand," said Ryan Reith, program vice president with IDC's Worldwide Mobile Device Trackers. "While many of the top vendors have reduced their 2020 production plans to align with the market decline, we’ve seen most of the cuts focused on their 4G portfolios.”
Reith said that most channels in developed markets will be dominated by 5G units by the end of 2020, leaving less shelf space for 4G. However, consumer demand is still low for 5G and when combined with a poor economy as well as 5G service fees may not encourage adoption until next year.
Given that there is more supply of 5G smartphones than demand along with the current poor economic climate, IDC forecasts the average selling prices (ASPs) for 5G smartphones in 2020 and beyond to drop quickly. In the second quarter, China saw 43% of 5G devices priced under $400 and IDC expects more regions to follow suit with 5G ASPs globally hitting $495 by 2023.
Because of declining prices for 5G smartphones, IDC expects 5G to capture about 50% of the global market by 2023.
"Although we expect year-over-year growth of 9% in 2021, that is only due to the large drop in 2020. The real recovery won't happen until 2022 when smartphone volumes return to pre-COVID levels," said Nabila Popal, research director with IDC's Worldwide Mobile Device Trackers. "Other elements beyond 5G will play a role in the market recovery, most notably the continued opportunity in developing markets. There continues to be a strong shift towards low- to mid-end 4G devices in developing regions, which make up over 80% of smartphone volumes in these regions."
Learn more about IDC’s research with its Worldwide Quarterly Mobile Phone Tracker.