The coronavirus, also known as COVID-19, started in late December 2019 in Wuhan, China, which slowly spread globally across 216 countries, shifting major paradigms concerning employees' work and personal lives. Technology became an integral part of peoples' lives as quarantining, and isolation demanded remote operating of most businesses. Smartphones and smart technology were the answer to most of the newfound crisis. The supply chain industry saw major disruptions due to the unprecedented lockdown and unannounced shutting down of manufacturing units. Businesses faced a decline in sales and revenue during the COVID-19 period. They had to develop digital and industrial automation solutions to create a value proposition for the market's emerging needs.
China is the largest manufacturer of smartphones, but the launch of newer models with next-generation features has come to a halt. There is a massive imbalance between supply and demand. Per capita income has reduced, resulting in customers mainly focusing on essentials rather than the luxury buying of electronic gadgets. The companies have seen significant sales; however, they have all seen a decline in the forecasted sales numbers. Some of the other reasons for the decline in sales might be travel bans leading to an imbalance in import and export and finally delivering to other countries by large smartphone manufacturers.
For instance,
- In November 2021, according to Economic Times, 5G smartphones are making 22% of the total market share, and more than 20 such models with 5G compatibility were launched over the entire quarter. Top brands like OnePlus, Oppo, Realme, Samsung, and Vivo are leveraging the 5G technology to target customers looking to get future-ready
Even with the cautious buying pattern of the customers, which led to a decline in sales of the smartphone market, features like 5G technology and AMOLET display were features that appealed to the customers and triggered sales, despite the shipping and supply chain deficits. Google announced the launch of its pixel successor and devised shifting of production facilities from China to Southeast Asia. Therefore, even if sales figures saw a decline during the first wave, the sales figures began to rise, with the new features and launches.
Impact On Demand
Factors such as reduced per capita income, global crisis, and losses have shaken consumers' confidence to buy premium electronic gadgets besides essentials. However, the growing digitization, accelerated industry 4.0, virtual classes, remote working, virtual socialization, thus the predominance of e-commerce, led to smartphones being an indispensable part of life. The pandemic accelerated the adoption of industry 4.0 enabled the integration of technology into real-world solutions. Work-life shifted to remote working, and social distancing led to virtual socialization. Integration of technology and digital solutions required compatibility of devices with 5G technology, and it became a driving factor for the rise in sales in the smartphone market. There has been a decline in the number of shipments due to various reasons such as supply chain disruptions, travel bans, factory shutdowns in China, and so on. However, some features like 5G compatibility and enhanced graphics and display have been factors that customers are willing to buy premium smartphones. Virtual classes, the popularity of Ed-tech applications, and mobile banking are other factors that trigger sales of smartphones during the COVID-19 lockdown.
For instance,
- In July 2021, One plus and Apple have seen an almost 50% dip in sales, and only budget smartphones from Xiaomi, Lava, have thrived due to the cautious buying of customers amidst this lockdown. Given the fact that the government banned the delivery of non-essentials in certain areas, the sales took a further hit in this situation
Impact on Supply Chain
The COVID-19 pandemic supply chain was disrupted globally due to unprecedented lockdown and suspension of manufacturing units and the shortage of supplies and hardware parts for smartphones and many more. The travel ban caused an imbalance in import and export and a bullwhip effect with unbalanced demand and supply creating detrimental effects on the supply chain. This led to companies looking for alternatives like diversifying vendors instead of relying on a single supplier overseas and digital solutions in the supply chain.
In 2020, iPhone maker Foxconn faced a delay in reopening production centers, which caused a shortage in supply. This global health emergency announcement further aggravated the supply chain issues.
For instance,
- In May 2020, supply chain disruptions due to COVID-19 had reduced mobile phone shipments all over and fallen to 1.57 billion in 2020 from 1.81 billion in 2019. Companies like Samsung and Apple with facilities in China were forced to close temporarily or relocate to other countries causing major production problems. Even with all the setbacks, time spent on mobile phones has increased due to remote working and virtual socialization, which is expected to drive sales and heal the economy.
Impact on Price
The rise in the average selling price of smartphones is mainly due to a shortage of supplies and a slight increase in demand or for smartphones with 5G technology. Customers are looking to upgrade their smartphones with future-proof Technology. Experts have varied opinions on why the average selling price has increased. Attractive sales strategies by Amazon and Flipkart have driven the sales, as customers are willing to better user experience and spend some of the accumulated savings during the COVID-19 on smartphones. The supply chain was already disrupted due to the U.S.- China trade war, causing logistics to become costlier, and the COVID-19 further aggravated the problem. This demand shortage has also raised the average selling price of smartphones and encouraged companies to move their production facilities from China.
For instance,
- In September 2021, according to a survey by Flipkart on the Indian smartphone market, consumer buying behavior is more inclined towards buying premium smartphones for a better User experience, especially with the onset of festivities in 2021. The survey also released 5G compatibility to be one of the key features for this discussion, and the other important features would be an AMOLED display with at least 6 GB ram, 128 GB storage, and fast charging, to name a few
Thus, the pandemic has caused a hike in average selling prices of smartphones due to various factors such as disproportionate supply and demand, inefficient supply chain, a decline in shipping due to travel restrictions, and newer launches.
LONG TERM STRATEGY ADOPTED BY MANUFACTURERS
Some of the most successful long-term strategies adopted by companies were innovation, software development, launching devices with next-generation features, and investing in the profitable portfolio, such as investing in budget smartphones until the market gains feasibility. Some of the companies have also been involved in CSR (corporate social responsibilities) activities like supplying oxygen, helping individuals in times of need, and in diversified virtual reality fields to increase visibility and retain market share. Top smartphone companies like Apple Inc. and OnePlus have launched the latest versions without failing to incorporate features like 5G compatibility and impressive graphic display. These features have persuaded most customers, even during this crisis, to spend a little extra to have a better User experience with premium smartphones. Since smartphones are used for various activities, from online classes to digital payment to investing in the share market and securing medical insurance, smartphones have become an indispensable part of life.
For instance,
- In September 2021, Apple released iPhone 13 pro and iPhone 13 Pro Max with a better quality camera and advanced battery life; it is also compatible with a 5G experience. This will give the iPhone fast performance and amazing display and graphics, with an ability to react intelligently based on the content of the screen
- In October 2018, One plus co-founder Carl Pei was willing to forgo the short-term goal to target a long-term dominance over the market, and the goals involve advancing in India. For the short term, the company is focused on manufacturing cell phones in the range of 10,000 to 15,000, keeping in mind the global crisis. They are likely to invest in the premium range once the market gains a little feasibility
Smartphones have become indispensable, and future-proof launches are attracting customers for a better user experience thus, driving the growth of the global smartphones market in the forecast period.
Conclusion
The pandemic has taken a toll on every aspect of life, including the global economy. With the significant downfalls in many sectors, government initiatives, a collaborative effort of industry players and consumers can win the fight against COVID-19. COVID-19 impacted the global economy, and most smartphone manufacturers based out of China have faced huge havoc with the closing down of factories to the relocation of factories, decline in shipments to other countries, and majorly decline in sales to that of the forecast numbers.
However, the sales numbers have gone up since the festive season of 2021, and major changes like the adoption of technology and digitization are here to stay, which will further drive the growth of the global smartphones market and features like 5G compatibility aid in the process. Thus, there has been an overall decline in sales of the smartphone industry.
