Local consumers in the market for a new smartphone may have to wait a bit longer as the coronavirus’s damage to global supply chains could result in less devices reaching stores, according to a new report by International Data Corporation (IDC).
IDC has revised its forecast for the Middle East and Africa (MEA) smartphone market in 2020 downwards, with shipments now expected to decline marginally year on year.
The research firm has comes up with a number of scenarios about how the virus could affect these shipments. Under its most conservative scenario, IDC’s forecast for year-on-year smartphone shipment growth across the MEA region in 2020 has been brought down from an increase of 2.4% to a 0.4% contraction.
Nabila Popal, a senior research manager at IDC said this scenario is still the most likely to occur, with both supply- and demand-side concerns expected to be alleviated by the second half of 2020. However, if the virus spreads even more, this outlook could be made worse.
About 13.5-million smartphones were sold locally in 2018 alone, accounting for about R35bn in sales, according to data from research firm GfK SA.
The IDC believes that the major challenge for the MEA smartphone market remains supply-chain and production constraints in China, as these are heavily affecting the flow of shipments into the region. Demand for smartphones has not yet been heavily interrupted, but unless the spread of the virus slows down, consumer demand will no doubt decline in the short term.
Local concerns
Local technology and telecoms players have raised concerns about the issue in recent weeks.
Blue Label Telecoms’ co-CEO Mark Levy said recently that supply issues have not yet affected their business, which imports a number of smart devices, including smartphones and point-of-sale units. He said Blue Label has some stock of devices for the time being, “but I’m worried about when I have to order 20 or 30,000 units. Where are we at? I don’t know”.
Blue Label is Cell C’s largest shareholder.
Levy said there was already a shortage of new phones in the local market given the closure of Samsung’s manufacturing facilities in South Korea because of the outbreak. For now, Blue Label will focus on the units in stock and “whatever is in [its] control” to continue doing business.
The coronavirus is also affecting MTN, which reported its own results last week. With operations in 21 markets, it has the greatest exposure to international markets and therefore supply-chain risk. CEO Rob Shuter said the telecoms industry as a whole is concerned about supply-chain disruptions. As a network provider, “Could there be a time when you can’t get networking equipment?” he said.
For its consumer business, Shuter said the group will keep its eye on smartphones and SIM cards. “Most of our markets are big, Android markets, so a lot of the handsets are coming from China. So perhaps customers will have to hold on to their handset for a little longer. We really need to make sure we’ve got SIM cards in the market for new customer acquisition.”
Covid-19’s ripple effect will be felt across all industries and economies globally, the IDC warns. “This humanitarian crisis will likely reshape many markets and industries in 2020.”
The complete effect of the viral pandemic will be determined by its trajectory, how fast Chinese supply chains adapt to operating at sub-optimal levels for at least the next three months, and how soon they can return to 100% capacity, said Popal.
“In MEA, except for Iran, only comparatively small numbers of Covid-19 cases have so far been observed, but the challenges in China around production and the supply chain are heavily affecting the flow of mobile phone shipments into the region.”
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March 18, 2020 at 07:56PM
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Possible smartphone shortage due to Covid-19, says report - Business Day
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