According to TrendForce research, due to lower-than-expected sales in 4Q21, the smartphone market in 1Q22 not only needed to adjust its accumulated inventory of finished products, but it was also affected by sluggish seasonal demand, resulting in relatively weak 1Q22 production performance. Coupled with the impact of recent events such as the Russian-Ukrainian war and lockdowns of Chinese cities, overall production performance in 1H22 will weaken, affecting total production in 2022. The original forecast of 1.38 billion units produced will be downgraded to 1.366 billion units, with annual growth rate slipping to 2.5%. Neither the COVID-19 pandemic nor the shortage of wafer production capacity has been significantly alleviated. This coupled with serious issues involving geopolitics, inflation, and energy shortages this year will generate variables in the smartphone market for 2022. Therefore, further downward revision of total 2022 production volume cannot be ruled out.
There are two key observations regarding the impact of the war on the smartphone market. First, brand sales have been suspended or have dropped sharply. According to TrendForce statistics, mobile phone sales in Russia and Ukraine account for approximately 3-4% of global market share, 85% of which are in the Russian market, with Samsung, Xiaomi, and Apple as the top three Russian mobile phone brands. Since Apple and Samsung announced the suspension of all exports to Russia, vacated market share will migrate to Chinese brands. If the war can be brought under control before the end of April, estimated impact on the smartphone market in 2022 will be approximately 20 million units.
Second, the war has exacerbated global inflation, which is strongly affecting energy and food prices in particular and is rapidly spreading from Europe to the world. This also implies that personal disposable income will shrink simultaneously, resulting in a prolonged replacement cycle in the smartphone market and phenomena such as falling budgets for stand-alone purchases. Due to inflation’s broad and profound influence, it is not yet possible to determine the extent of its impact on the global smartphone market but there is indeed a high risk of downward revisions in the future.
It should be noted, in addition to the war, the pandemic will continue to affect smartphone market trends in 2022. China, the world's largest smartphone consumer market, is still adopting a dynamic zero-COVID policy. Not only will this policy exacerbate manpower and material shortages in the intricate smartphone supply chain, pandemic prevention activities will also throw cold water on demand. TrendForce believes, given China's short-term economic growth rate, the current forecast for China's smartphone market shipments will drop from approximately 325 million units last year to 300 million units, representing an annual decline of approximately 7.7%, and a possibility of a continued downturn.
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