smartphones
Counterpoint & Canalys: Global Smartphone Market Shows Signs of Recovery in Q3-2020
The global smartphone market contracted 4 percent year on year (YoY), but grew 32% in 3Q-2020 to 365.6 million units. The market was negatively impacted by the Covid pandemic, according to the latest report from Counterpoint Research. The recovery was driven by pent-up demand in key markets such as the US, India and Latin America, said the report, adding that easing lockdown conditions worldwide also helped to streamline the supply chain again.
All leading smartphone brands except Huawei posted sequential growth compared to the second quarter, with Samsung retaining the top spot with 79.8 million shipments, up 2 percent year on year and 47 percent quarter on quarter for a 22 percent market share. Huawei followed with shipments of 50.9 million, down 24 percent year on year and 7 percent sequentially for a 14 percent market share.
The quarter saw Xiaomi overtake Apple to capture the third spot for the first time with a 13 percent market share thanks to its highest-ever shipments of 46.2 million units in Q3. Xiaomi’s shipments were up 28 percent year on year and 35 percent compared to Q2 thanks to an impressive performance in China and rapid growth at Huawei’s expense in new markets like Latin America, Europe and the MEA.
Apple and Oppo rounded out the top 5 with market shares of 11 percent and 8 percent following third-quarter shipments of 41.7 and 31.0 million respectively. The biggest mover was Realme, with a sequential surge of 132 percent in shipments volume to rise to 7th spot thanks to a 4 percent market share, behind Vivo with 8 percent. The result means Realme became the world’s fastest brand to ship 50 million smartphone units since launching, according to the report.
Research Analyst Abhilash Kumar said, “Xiaomi reached its highest-ever shipments at 46.2 million units in Q3 2020. In China, Xiaomi’s struggle for growth ended and shipments were up 28% YoY and 35% QoQ. This impressive show by Xiaomi in China was driven by a series of campaigns and promotions during the brand’s decennial celebrations in August. Also, in new markets like LATAM, Europe and the MEA, Xiaomi’s share expanded rapidly at the expense of Huawei amid US-China trade sanctions. The brand is also performing well in Southeast Asian markets like Indonesia, Philippines and Vietnam.”
Commenting on realme’s performance, Kumar said, “Accumulative shipments of realme smartphones reached over 50 million units in Q3; with this, it became the world’s fastest brand to hit 50 million shipments since inception, surpassing top players such as Samsung, Apple, Huawei and Xiaomi. In Q3, realme grew to become one of the top 5, or even top 3, brands in its key markets, including India, Indonesia, Bangladesh, Philippines and some other Southeast Asian countries. Having released a strong 5G smartphone portfolio during Q3, realme also achieved a remarkable growth in the China market (90% QoQ in terms of sales volume). With its efforts to bring the affordable yet premium-like products to consumers, as well as its ability to offer smooth digital shopping and after-sales services in different countries, realme has emerged as the most resilient brand during and after the pandemic crisis. Additionally, we see realme’s expansion beyond smartphones into the IoT space. Products like smartwatches, TWS and smart TVs will further help the brand strengthen its position in the global market.”
Other Key Takeaways:
- Apple iPhone shipments declined 7% YoY during Q3 2020 as the company delayed its annual iPhone launch from Q3 to Q4. We expect Apple’s performance to bounce back in Q4 2020 with the launch of the 5G-powered iPhone 12 series.
- OnePlus grew 2% YoY and 96% QoQ driven by the strong performance of 8 series and the Nord in key markets like India and Western Europe.
- Huawei drove more than 40% of the total 5G shipments, thanks to strong performance in China.
- Motorola grew 37% QoQ and 4% YoY driven by strong performance in Latin America and the US-driven by the strong performance of E6 and G8 series.
- vivo has been performing well in overseas markets, especially in Southeast Asian countries like Indonesia and the Philippines, driven by its Y series. Like other brands, it has also entered the IoT segment, launching a smartwatch in September.
- OPPO is relying on operator partnerships to expand in European markets. Also, it is building partnerships with leading sports events to grow its influence across Europe.
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Separately, Canalys reported that worldwide smartphone shipments reached 348.0 million units in Q302020, at a 1% decline year on year. But they were up 22% on the previous quarter. Samsung regained the lead, up 2% to 80.2 million units. Huawei slipped into second place with a 23% fall to 51.7 million units. Xiaomi took third place for the first time, reaching 47.1 million units with 45% growth. Apple, which had no flagship iPhone launch in September, shipped 43.2 million, down 1%, while Vivo completed the top five, shipping 31.8 million units. Oppo came sixth, with 31.1 million units, while its sister brand Realme moved into seventh, its highest ever position, with 15.1 million units. Lenovo reported 10.2 million units, as it finally caught up with orders delayed due to disruption at its Wuhan factory, and Transsion shipped 8.4 million units as recovery started in its key African markets.
“Xiaomi executed with aggression to seize shipments from Huawei,” said Mo Jia, Analyst. “There was symmetry in Q3, as Xiaomi added 14.5 million units and Huawei lost 15.1 million. In Europe, a key battleground, Huawei’s shipments fell 25%, while Xiaomi’s grew 88%. Xiaomi took a risk setting high production targets, but this move paid off when it was able to fill channels in Q3 with high-volume devices, such as the Redmi 9 series. The vendor invested to bring in local expertise to gain the trust of distributors and carriers,” added Jia. “But it still faces competition from Oppo and Vivo, which have grown to cover a wide range of price bands in Southeast Asia, and are now driving into Europe too, where they are positioning as more premium options for carriers, and risk trapping Xiaomi at the low end. Realme is also becoming a serious contender, growing beyond ecommerce, and threatens to undercut Xiaomi as it transforms its go-to-market strategy.”
“Samsung suffered in Q2 due to its dependence on offline retail, but Q3 saw a major recovery,” said Canalys Analyst Shengtao Jin. “Its momentum was fueled by three key factors. Firstly, in many regions it saw pent-up demand from Q2 spill over into Q3. Secondly, it regained second place in India, as its Korean brand was shielded from anti-Chinese sentiment (see Canalys press release: India’s smartphone market rebounds in Q3 2020 to record high of 50 million). Thirdly, Samsung ramped up its launches of low-to-mid-range devices, and introduced other incentives, such as discounts and free online deliveries, to stimulate demand. Samsung is now positioning for more online sales as it launches exclusive online devices, such as the Galaxy F series for Flipkart. Despite its momentum, Samsung’s oversized portfolio is still the biggest pain point for the channel, which is reluctant to hand it more power.”
“This quarter was a welcome relief, with few restrictions on businesses and citizens between July and September,” said Ben Stanton, Senior Analyst. “But the ramifications of the first-half lockdowns still persist. Offline channels, for example, are being increasingly pared back, amid store closures and staff redundancies, and vendors now have to compete harder to attain floorspace. Limited supply of 4G chipsets will cause supply chain bottlenecks and increase production costs. Additionally, rising COVID-19 rates in regions such as Europe will soon force governments to bring back stricter nationwide measures. The second wave will stretch government stimulus budgets, and cause widespread bankruptcies and job losses in affected areas. Unfortunately, the relief of Q3 looks set to be short-lived.”
References:
https://www.canalys.com/newsroom/canalys-worldwide-smartphone-market-q3-2020
UPDATED: Huawei now #1 global smartphone vendor
Despite the severe U.S. restrictions on Huawei, the company has succeeded in taking the top spot in the global smartphone market, according to figures from Canalys. The market research firm estimates Huawei shipped more smartphones worldwide than any other vendor for the first time in Q2 2020, marking the first quarter in nine years that a company other than Samsung or Apple led the market.
Note, however, that global smartphone sales DECLINED in the second quarter. Huawei shipped an estimated 55.8 million devices in the quarter, down 5 percent year on year. Samsung came second with 53.7 million smartphones, down 30 percent from a year earlier.
Huawei’s resilience was due to its strong position in China, where its shipments rose 8 percent in Q2. This offset an estimated 27 percent fall in its shipments abroad. Canalys estimates over 70 percent of Huawei’s smartphone sales are now in mainland China. That helps explains why the company can be so successful in selling smartphones, despite not being able to use licensed Google Android and associated apps on its latest flagship devices (that’s because Huawei was placed on the U.S. Entity list last year).
Canalys said the situation would likely not have happened without the Covid-19 pandemic. Huawei profited from the strong recovery in the Chinese economy, while Samsung has a very small presence in China, with less than 1 percent market share, and suffered from the restrictions in key markets such as the US, India, Brazil and Europe.
“This is a remarkable result that few people would have predicted a year ago,” said Canalys Senior Analyst Ben Stanton. “If it wasn’t for COVID-19, it wouldn’t have happened. Huawei has taken full advantage of the Chinese economic recovery to reignite its smartphone business. Samsung has a very small presence in China, with less than 1% market share, and has seen its core markets, such as Brazil, India, the United States and Europe, ravaged by outbreaks and subsequent lockdowns.”
“Taking first place is very important for Huawei,” said Canalys Analyst Mo Jia. “It is desperate to showcase its brand strength to domestic consumers, component suppliers and developers. It needs to convince them to invest, and will broadcast the message of its success far and wide in the coming months. But it will be hard for Huawei to maintain its lead in the long term. Its major channel partners in key regions, such as Europe, are increasingly wary of ranging Huawei devices, taking on fewer models, and bringing in new brands to reduce risk. Strength in China alone will not be enough to sustain Huawei at the top once the global economy starts to recover.”
As a result, it will be hard for Huawei to maintain its lead in the long term. Its major channel partners in key regions such as Europe are increasingly wary of stocking Huawei devices, taking on fewer models and bringing in new brands to reduce risk, as per the above Canalys quote from analyst Mo Jia.
Separately, Gartner estimates that 10% of smartphone shipments, or about 220 million units in 2020, will have 5G capability, but they’ll work on “5G” networks with a LTE core (5G NSA).
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Addendum:
Huawei’s just announced global licensing agreement with Qualcomm grants Huawei back rights to some of the San Diego-based company’s patents effective Jan. 1, 2020. It remains to be seen if Huawei will design smartphone components that use those patents in their next generation of 5G endpoint devices.
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References:
https://www.canalys.com/newsroom/Canalys-huawei-samsung-worldwide-smartphone-market-q2-2020
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Update- August 3, 2020:
According to market research firm Omdia, overall Q2-2020 smartphone shipment volume was down a hefty 15.7%, year-on-year, to 229.7 million units.
Samsung will certainly hope there are better times ahead. Omdia figures show the South Korean behemoth lost its #1 position in Q2, dislodged by Huawei. Samsung’s Q2 shipments plummeted nearly 28%, year-on-year, to 54.3 million.
Many of Samsung’s most important markets, were significantly impacted by COVID-19, especially emerging markets, which apparently accounted for more than 70% of Samsung’s overall shipments in 2019.
For its part, Samsung is hopeful of a Q3 smartphone recovery, helped by the launch of new flagship models, including the Galaxy Note and a new foldable phone.
Huawei, helped by a resurgent domestic market in China, snagged a 20% global smartphone share during Q2 (55.8 million units), up from an 18% market share the previous quarter. Year-on-year, Huawei’s Q2 shipment units were down a comparatively modest 4.9%.
Apple was one of the few OEMs to increase Q2 shipment volumes, year-on-year (up 13.1%, to 39.9 million units). The iPhone SE, a model with mid-range pricing, coupled with the iPhone 11, helped Apple expand its unit shipments, and cement its third-spot position with a market share of 14% (up from 11% in Q2 2019).
“With the launch of the iPhone SE in April, Apple has released a long-desired product, with an attractive price,” said Jusy Hong, director of smartphone research at Omdia.
“For existing iPhone users who needed to upgrade their smartphones in the second quarter, the new SE represented an affordable option that does not require a large downpayment or high monthly repayment rates,” added Hong.
Reference:
https://www.lightreading.com/huawei-apple-buck-q2-smartphone-trends—report/d/d-id/762886?
TrendForce forecast: Chinese 5G smartphones to hold 4 of top 6 spots by production volume in 2020
Annual 5G smartphone production is expected to reach 235 million units in 2020, an 18.9 percent penetration rate, according to the latest research from TrendForce. Total smartphone production is forecast to reach 1.24 billion in 2020.
Ranked by production volume, Chinese brands are expected to account for 4 of the top 6 spots for 5G smartphone brands in 2020. Huawei tops the ranking, and is expected to produce around 74 million 5G smartphones in 2020. Apple is in 2nd place with a forecast yearly 5G smartphone production of around 70 million units. Samsung will be in 3rd place with production of 29 million 5G smartphones. They are followed by Chinese brands Vivo, Oppo and Xiaomi in 4th, 5th and 6th place with 5G smartphone production volumes of 21 million, 20 million and 19 million units respectively.
Note that this is a forecast, especially for Apple which has not yet announced a 5G smartphone.
Mid-to-low end 5G chipsets released by AP suppliers are expected to raise the penetration rate of 5G smartphones in 2021
TrendForce’s analysis of future developments in the 5G market shows that an aggressive push by mobile processor manufacturers will lead to the rapidly increasing presence of 5G chipsets in the mid-to-low end market, driving 5G smartphone production to surpass 500 million units in 2021, which will potentially account for about 40% of the total smartphone market. Once 5G chip prices reach a stable level this year, smartphone brands may look to gain additional shares in the 5G smartphone market by sacrificing gross margins. In doing so, they are likely to accelerate the drop of 5G smartphones’ retail prices, and the market may see the arrival of 5G smartphones around the RMB 1000 price level by the end of this year. Incidentally, it is worth noting that the penetration rate of 5G smartphones does not equal the usage rate of the 5G network, which depends on the progress of base station construction. Since the current 5G infrastructure build-out is pushed back as a result of the pandemic, the global 5G network coverage will be unlikely to surpass 50% before 2025 at the earliest, with complete coverage taking even longer.
Editor’s Questions:
In the absence of any true 5G standard, e.g. IMT-2020.SPECs, will any of these 5G smartphones work on a 5G network other than the one they are subscribed to? Or will they fall back to 4G-LTE? Will the 5G smartphones sold in 2020 be upgraded to comply with IMT-2020.SPECs and/or 3GPP Release 16 specs?
References:
http://www.trendforce.com/presscenter/news/20200722-10398.html
Omdia: Global smartphone shipments plunge in Q1-2020; Mobile communications revenue to drop 4.1% in 2020
Omdia reported today that global smartphone shipments dropped by 16.8 percent in the first quarter of 2020 as vendors struggled to manage coronavirus-driven production shutdowns, product-launch delays and depressed consumer demand.
Shipments in the first quarter fell to 274.4 million units, down from 329.9 million during the same period in 2019, according to the Omdia Smartphone Intelligence Service. This plunge impacted all the major smartphone brands, with nine of the top-10 OEMs suffering shipment declines compared to the first quarter of 2019.
Editor’s Opinion: The decline will be much greater in Q2-2020 due to all the lockdowns all over the world. Who needs a smartphone when you’re confined to your residence? I hardly use mine at all as I prefer a laptop or tablet when at home.
“Early in the first quarter, the smartphone market was sent reeling by the shutdown of production at facilities in China, which halted the manufacturing of phones and their key components,” said Jusy Hong, smartphone research and analysis director at Omdia. “While concerns about this situation have been alleviated, the smartphone brands also faced new challenges, including disrupted launch schedules for new phones. Even more troubling for smartphone makers is a major decline in global demand due to government lockdown mandates.”
Despite expected rebounds in some countries, the rest of the year is expected to be challenging for smartphone OEMs. Omdia forecasts global smartphone shipments will decline to 1.20 billion units this year, down 13.1 percent from 1.39 billion in 2019.
OEMs feel the pain in the first quarter
Almost across the board, smartphone OEMs faced significant declines in unit shipments compared to the first quarter of 2019.
Samsung retained the top position, with 58.9 million units shipped during the first quarter—a 17 percent decline compared to the first quarter of 2019. Second-ranked Huawei saw its shipments decline by more than 17 percent, to 49 million units, down from 59.1 million in the first quarter of 2019.
Apple, in third place, saw shipments decline to 38.5 million units, down from 43.8 million a year earlier. The 12.0 percent decline comes during the first quarter, historically the weakest period of the year for Apple.
Rounding out the Top 5 are Xiaomi and OPPO. Out of the Top 10, Xiaomi experienced the second least severe decline in the quarter, of 8.2 percent. Only Tecno, in 10th place, attained a lower decrease better with a 7.6 percent year-over-year decline. Xiaomi shipped 25.3 million units in the first quarter, compared to 27.5 million units in 2019. OPPO, on the other hand, suffered a 19.2 percent decline, with shipments falling to 20.4 million units, down from 25.2 million a year earlier.
Realme bucks the downturn
The rest of the Top 10 is made up of vivo, Realme, Motorola, LG, and Tecno. The bright spot here is Realme, which achieved year-over-year growth based on its continued success in India. seventh-ranked Realme was the only top-10 OEM to attain growth during the quarter, with shipments totaling 6.1 million units, up 88 percent from 3.2 million during the first quarter of 2019.
For the others in this group, the first quarter brought significant challenges. Looking at vivo, company shipments declined 19.9 percent, falling from 24.3 million units last year to 19.5 million this year. Motorola, in eighth place, saw shipments decline 35.4 percent to 5.5 million units. While Motorola finally launched its updated RAZR, featuring a foldable display, the publicity surrounding that high-profile device was not enough to support the overall performance of Motorola’s product portfolio.
With or without the impact of the pandemic, LG continues to struggle with its mobile handset division. Shipments declined to 5.4 million units, down from 8.6 million units a year ago—a drop of 37.4 percent. Rounding out the top 10 is Tecno, which saw units decline by a relatively modest 7.6 percent, declining from 3.8 million units last year to 3.5 million units in the first quarter.
First-half struggles
“The smartphone market will face major struggles in the first half of 2020 as different countries experience the initial shock and recovery periods at different times. That’s why OEMs are more afraid of second-quarter sales results,” Hong said. “However, Omdia does expect the smartphone market to start to recover in some countries and regions in the second half of the year.”
Early in the first quarter, the most severe impact on the smartphone market was the shutdown of production and supply chain facilities in China. However, fears over a prolonged closure of essential production, supply chain and logistics operations in China have been alleviated, as signs point to economic activity ramping up quickly in the country.
Smartphone makers in the first quarter also had their product-launch plans disrupted by the cancellation of the Mobile World Congress event in Barcelona, Spain, where many companies had planned to roll out new products.
“Because of the cancellation of the Mobile World Congress, and uncertainty in the supply chain, original product schedules had to be re-evaluated,” said Gerrit Schneemann, senior analyst, smartphones, at Omdia. “However, OEMs seem to have found their footing on how to address new device launches going forward.”
Demand disaster
The impact of the outbreak on the smartphone business has now shifted almost completely to the demand side of the equation.
“Although handsets can be produced at nearly normal levels, the markets for these handsets are mostly in some state of shutdown,” Hong said. “Some countries have made more progress in dealing with the outbreak, while others are still in the midst of fighting the pandemic, and still others won’t feel the full effects of the pandemic until later in the year.”
In Europe, where some countries have been under strict lockdown rules for some time, initial efforts have been made to ease restrictions. Similarly, South Korea has taken steps to open up. In other countries, like in some parts of the United States, only the last few weeks of the quarter were impacted by broad stay-at-home orders, while consumer behavior had remained unrestricted until then.
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Earlier today, Omdia issued this press release:
Coronavirus crisis deals a $51 billion blow to the global mobile communications industry outlook Mobile revenue to drop 4.1 percent worldwide; regional impact to vary
LONDON (April 30, 2020) — Mobile services represent critical infrastructure that’s allowing people to stay connected during the coronavirus crisis. However, that doesn’t mean these services are immune to the pandemic’s economic shock, with 2020 market revenue now expected to come in about $51 billion short of the previous forecast, according to Omdia.
Worldwide mobile communications services market revenue will total $749.7 billion this year, down from the prior forecast of $800.3 billion. This compares to $781.5 billion in 2019. Annual revenue will fall by 4.1 percent this year, with the decline amounting to $31.8 billion.
“Mobile phone companies around the world are experiencing usage spikes as more countries encourage or enforce social distancing and work-from-home rules to slow the spread of the COVID-19,” said Mike Roberts, research director at Omdia. “However, the spikes aren’t enough to overcome the impact of the pandemic on consumer behavior. These rules are having a dramatic impact on various regions of the world, halting new subscriptions and upgrades in the United States, while slashing revenue for operators in Europe.”
Consumer uptake of 5G will be slower than previously forecasted, due to the economic situation as well as the possibility of delays in 5G network deployment and in the availability of 5G devices. Omdia will release more details on 5G shortly.
In the Americas, mobile service revenue is set to decline by 3.7 percent to $237 billion in 2020. Most of that loss will come in the United States as both net additions and upgrades to higher data plans slow or stop altogether.
Europe will suffer the largest impact of the crisis, with mobile service revenue falling 9.1 percent to $131 billion, representing a downgrade of 9.3 percent compared to Omdia’s previous forecast. This decline will be driven by significant reductions in mobile prepaid revenue and a dramatic drop in inbound roaming revenue.
Vodafone UK, for example, said mobile Internet traffic has increased by 30 percent and mobile voice traffic by 42 percent due to the crisis. At the same time, mobile service providers are seeing new business grind to a halt as retail stores close and consumers stop buying new phones as job losses mount. One example of this widespread trend is AT&T, which is closing 40 percent of its retail stores in the United States.
The Middle East and Africa will see a 3.9 percent decline in mobile service revenues to $84 billion, representing a downgrade of 8.4 percent from Omdia’s previous forecast. Major factors for the decline include the impact of low oil prices on Gulf economies and the fragility of economies and health care systems in parts of Africa.
While the impact of the coronavirus on the mobile market is significant in every region, it pales in comparison to the impact the crisis is having on sectors such as travel, tourism, hospitality and retail, which have suffered partial or complete shutdowns. The International Monetary Fund now expects the global economy to contract by 3 percent in 2020, according to its latest World Economic Outlook, which was released earlier this month.
“The massive contraction will clearly impact every segment of the economy, including mobile, but how long it will last in each country and region is virtually impossible to predict,” Roberts said. “One bright spot is that in China, the first country hit by the pandemic, there are signs that the mobile market and broader economy is starting to come back to life.”
Given the high level of economic and commercial uncertainty created by the COVID-19 pandemic, Omdia will be producing a full revision of its global mobile forecasts next quarter.
About Omdia
Omdia is a global technology research powerhouse, established following the merger of the research division of Informa Tech (Ovum, Heavy Reading and Tractica) and the acquired IHS Markit technology research portfolio*.
We combine the expertise of over 400 analysts across the entire technology spectrum, analyzing 150 markets publishing 3,000 research solutions, reaching over 14,000 subscribers, and covering thousands of technology, media & telecommunications companies.
Samsung and Huawei dominate global 5G smartphones; Samsung expects sales to be down significantly due to COVID-19
Strategy Analytics reports that Samsung has become the leader of the 5G smartphone market, shipping 8.3 million handsets across the world during the first quarter of 2020 for a 34.4 percent market share. The South Korean conglomerate took advantage of its strong global distribution networks and operator partnerships and the popularity of its S20 5G and S20 Ultra 5G devices to top the ranking. Strategy Analytics stated that the biggest markets for 5G smartphones were China, South Korea, the U.S. and Europe.
Huawei was the #2 global smart phone vendor with a 33.2 percent market share after shipping 8.0 million 5G smartphones, nearly all in China. Note that Apple isn’t listed because the Cupertino, CA company has yet to announce a 5G smartphone.
The top 5 was rounded out by three other Chinese vendors – Vivo, Xiaomi and Oppo – with 12.0 percent, 10.4 percent and 5.0 percent of the global market, respectively.
Table 1: Global 5G Smartphone Vendor Shipments and Marketshare in Q1 2020
The Strategy Analytics report stated that worldwide shipments of 5G smartphones in the first quarter of 2020 came to 24.1 million, easily topping shipments of 18.7 million in 2019 as a whole. That’s despite the firm’s earlier forecast that global smartphone shipments would be down 25% in 2020.
Chinese smartphone vendors captured 61 percent of top 5 vendor 5G smartphone shipment volumes in Q1 2020, with the majority of those volumes going to the China 5G market. This reflects the speed with which Chinese operators have rolled out 5G networks, as well as the underlying demand for 5G smartphones, despite the Covid-19 pandemic that shut down large parts of China during the Q1 2020 period. As China continues to ramp up economic activity, Strategy Analytics expects 5G shipments to this market to continue to expand dramatically in 2020.
Samsung Electronics disagrees with that forecast as they warned in today’s earnings report that 5G infrastructure investments may face reductions or delays – both internationally and domestically – during the second quarter of 2020.
Sales and profits of set products business, including smartphones and TVs, are expected to decline significantly as COVID-19 affects demand and leads to store and plant closures globally.
In the second half, uncertainties driven by COVID-19 will persist as the duration and impact of the pandemic remain unknown. The Company plans to focus on optimizing resource allocation in the short term, while continuing to strengthen its technology leadership and develop innovative set products.
The Mobile Communications Business aims to strengthen its product lineup by introducing new premium models and expanding offerings of 5G models for the mass market. The Networks Business will focus on developing technologies and enhancing global competitiveness to reinforce the 5G business.
For the Consumer Electronics Division, under the risk of current economic uncertainties, the Company will closely monitor the market situation and will continue to focus on minimizing negative impacts by investing in efficient marketing and promotions tailored to each region and by optimizing its logistics.
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A shrinking smartphone market and store closures will lead to an “inevitable” drop in earnings for the current quarter, Jong min Lee, Samsung’s vice president of mobile, said along with other important items on Samsung Electronics earnings call.
In the first quarter, overall market demand drastically decreased quarter-on-quarter as a result of supply chain issues in China caused by the COVID-19 break — outbreak only in this quarter and travel restrictions in the last few weeks of the quarter following the global spread of the pandemic. As the impact of COVID-19, including those on logistics, began to take effect in March, our smartphone shipments also decreased quarter-on-quarter. However, we maintained sound profitability quarter-on-quarter by efficiently deploying marketing investment by improving overall product mix while increasing the sales portion of our premium and 5G model.
Now let me move on to the outlook for the second quarter. With the global spread of COVID-19, demand is expected to drop sharply in most regions due to the economic downturn caused by lockdown across the globe and a corresponding decline in consumer sentiment. As the market shrinks and effects of store closures continue to have direct impact, a drop in sales of our major products and overall performance seems inevitable. Although market uncertainty is higher than ever, we will focus on improving cost effectiveness and strengthening online and B2B channels. In case there are additional disruptions at our production sites, we will respond by effectively utilizing our diversified manufacturing capabilities around the globe. However, we are committed to protecting the health and safety of our employees as well as preventing community spread. We have been thoroughly implementing disinfections and prevention measures in our offices and production facilities in all regions.
For the network business, it is possible that investments in 5G networks will be reduced or delayed domestically and internationally as more effects of COVID-19 unfold.
Finally, I will share our outlook for the second half. In the midst of uncertainties such as the possibility of the prolonged pandemic and the timing of market recovery, we expect the competition to intensify further as companies try to recover from weakness in the first half. For the mobile business, while continuing to offer differentiation in the premium segment with new foldable and Note model launches, we plan to widen the range of choices for our customers and enhance competitiveness within each price range by introducing 5G models to our mass market lineup.
In addition, we will also improve operational efficiency across all areas, including R&D, production, supply, channel and marketing. For the network business, despite uncertainties around the 5G invest plan, we will continue to strengthen our technological competitiveness while improving our 5G business compatibilities globally for the mid- to long term. Thank you.
References:
Strategy Analytics: Global Smart Phone Market to Decline 25% in 2020
https://news.samsung.com/global/samsung-electronics-announces-first-quarter-2020-results