Coronavirus outbreak could spark five-year low in smartphone production

10 Feb 2020212 Views

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Market analysts are predicting that the coronavirus outbreak in China will have a knock-on effect for the whole smartphone industry.

While the world tries to control the spread of the coronavirus outbreak at a time when confirmed cases outside of China have been called the potential “tip of the iceberg”, smartphone manufacturers are getting nervous about their production schedules.

A report by industry analyst firm TrendForce estimated that the forecast for global production of smartphones will likely see a 12pc dip year on year as a result of the outbreak. With 275m expected units to be produced in Q1 2020, this would be a five-year low for the industry.

Many of the factory workers who produce the handsets are slowly starting to go back to work today (10 February) following the enforced, extended Chinese New Year break issued by the country’s government.

TrendForce said that the outbreak is not expected to cause an immediate impact in the supply chain, but the number of devices that can be produced will be tied into the status of upstream supply chains and where manufacturers such as Foxconn can import or export critical components from.

Apple production down by 10pc

Of the top six smartphone brands globally, Samsung is expected to be the least affected as its main production base is in Vietnam and its products account for just 2pc of the market in China. Despite this, Samsung’s production forecast is expected to fall by 3pc because some of its components are manufactured in China.

Huawei, a company under fire from the US, has been focusing its smartphone business on China, and it is expected that the outbreak will result in production slumping by 15pc to 42.5m units in Q1 2020.

Meanwhile, Apple faces uncertainties in its labour force’s work resumption, TrendForce said, and the supply of certain key components for new iPhones can’t be delivered. These setbacks will directly affect the upcoming release of the iPhone SE2 and it is expected to lead to a decrease in quarterly iPhone production by about 10pc, from 45.5m to 41m units.

“In terms of yearly outlook, as long as the outbreak can be controlled and a basic level of demand can be supported by the overall global economy, TrendForce believes that most demand is deferred rather than eliminated and therefore does not have an overly pessimistic outlook towards smartphone production in 2020,” the firm said.

As well as issues with production, some of the major tech companies in this sector, including Ericsson and LG, have pulled out of the Mobile World Congress event later this month over concerns about the coronavirus outbreak.

Colm Gorey is a senior journalist with Siliconrepublic.com

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