Demand for smartphones is drying up

Canalys prelim Q2 data indicates economic headwinds and worries of 'inventory pile-up'

Demand for smartphones is fading amid households' fears about rising inflation and other monetary pressures, although brands including Samsung and Apple are weathering the economic storm.

Global shipments into the channel declined 9 percent in calendar Q2, according to preliminary data from market researcher Canalys, indicating sales volumes of around 287.5 million units.

"Vendors were forced to review their tactics in Q2 as the outlook for the smartphone market became more cautious," said Runar Bjørhovde, research analyst.

"Economic headwinds, sluggish demand and inventory pile-up have resulted in vendors rapidly reassessing their portfolio strategies for the rest of 2022. The oversupplied mid-range is an exposed segment for vendors to focus on adjusting new launches, as budget-constrained consumers shift their device purchases toward the lower end."

It was only a few years back that Samsung and Apple were clamoring to shore their mid-range line-up. Both companies fared relatively well during Q2, with Samsung boosting market share to 21 percent from 18 percent and Apple taking 17 percent of total sales, up from 14 percent.

The finalized figures for the vendors aren't yet available from Canalys but the direction of travel is clear: in third, fourth, and fifth place were Xiaomi, OPPO, and Vivo, all reporting market share declines.

This fall in demand is causing some sleepless nights among the "entire smartphone phone supply chain," said Canalys analyst Toby Zhu.

"While component supplies and cost pressures are easing, a few concerns remain within logistics and production, such as some emerging markets' tightening import laws and customs procedures delaying shipments."

The upshot of growing stockpiles? Vendors will "look to accelerate sell-through using promotions" ahead of the winter holiday season.

Zhu said that in "contrast to last year's pent-up demand, consumers' disposable income has been affected by soaring inflation this year. Deep collaboration with channels to monitor the state of inventory and supply will be vital for vendors to identify short-term opportunities."

It's been a roller coaster time for smartphone industry, with sales shrinking for the first time in 2020 following disruptions caused by the pandemic.

The PC industry is also reporting declining sales into the channel on the back of worries about a global recession. ®

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