Due to weaker than expected demand, smartphone shipments are projected to decline this year by 3.5%, a significant drop from previous forecasts calling for growth in 2022, according to new research from International Data Corp. (IDC).
IDC anticipates this will be a short term set back with the market rebounding to achieve a five-year compound annual growth rate (CAGR) of 1.9% through 2026.
"The smartphone industry is facing increasing headwinds from many fronts – weakening demand, inflation, continued geo-political tensions, and ongoing supply chain constraints,” said Nabila Popal, research director of IDC’s mobility and device trackers. “However, the impact of the China lockdowns – which have no clear end in sight – are far greater. The lockdowns hit global demand and supply simultaneously by reducing demand in the largest market globally and tightening the bottleneck to an already challenged supply chain.”
Because of this OEMs, including Apple and Samsung, have cut back orders this year. Apple appears to be the least impacted vendor due to its control over its supply chain and high-priced segment. With the challenges easing by the end of 2022, 2023 will see a rebound of growth.
Despite lower shipments, some positive news in the realm of 5G devices indicates growth of 25.5% year-over-year in 2022, accounting for 53% of new shipments with nearly 700 million devices and an average selling price of $608, IDC said.
While 5G also will suffer from the lockdowns in China and the overall reduction in the market, 5G in the long term will reach a volume share of 78% in 2026 with average selling prices (ASPs) dropping to $440. By contrast, 4G ASP is expected to be $170 this year.
"On the SoC side, 4G SoC supply has been tight, but the market continues to shift towards 5G SoCs," said Phil Solis, research director at IDC's semiconductor team. "The bigger problem has been the tight supply of components such as PMICs, display drivers and discrete Wi-Fi chips. Capacity is being increased for these semiconductors that are made in higher process nodes and newer versions of Wi-Fi chips are being made with newer process nodes. At the same time, demand is dropping. Combined, these supply and demand changes will put the market more in equilibrium."