Bloomberg: Global smartphone market will go from bad to worse

On the evening of May 11, Bloomberg published an article saying that all signs indicate that the future development trend of the global smartphone market is from bad to worse.

After Apple Inc. (hereinafter referred to as "Apple") released its very poor second quarter results for fiscal 2016 (ending in March), some investors began to wonder about the future direction of the smartphone market. Now, the results of several Asian mobile phone component suppliers seem to have given the answer: the smartphone market will go from bad to worse before a new recovery.

On Tuesday, three Asian mobile phone component suppliers released their quarterly financial reports. The results of the financial reports indicate that the future prospects of smartphone manufacturers and component manufacturers are not optimistic. Pegatron, an Apple iPhone assembler, reported a 6.5% year-on-year decline in revenue and a 35.1% year-on-year decline in net profit in the first quarter.

Minebea, a Japanese manufacturer that mainly supplies LED modules for iPhones, reported lower-than-expected revenue and profit in the first quarter. Japan Display issued a performance warning on Tuesday, saying it expects a net loss of 31.8 billion yen (about $291.96 million) in the fiscal year ending March 31, a sharp increase from a net loss of 12.3 billion yen in the previous year.

These Asian suppliers are located upstream in the supply chain of mobile phone manufacturers, so their performance is usually a bellwether for the performance of smartphone manufacturers such as Apple, Samsung and Xiaomi. Apple's second-quarter revenue fell for the first time in 13 years, which has shown that the global smartphone market continues to deteriorate. Now, the performance of these suppliers has led industry insiders to believe that the smartphone market will face a triple blow in the future: declining sales, more intense market share competition and shaky prices.

“The smartphone industry will continue to grow slower this year, competition will intensify and prices are likely to continue to fall,” said Richard Ko, an analyst at KGI Securities.

Worst situation in 9 years

Today, the global smartphone market is facing its worst situation since Apple launched the first iPhone in 2007, and the sluggish performance of Megan Semiconductor and its peers is only the latest manifestation of this bad situation.

China plays a major role in the current downturn in the global smartphone market. China has always been the growth engine of the smartphone market, but it has cooled down recently. Smartphones are no longer a novelty in China, and most local brands are targeting the mid-range and low-end markets. Compared with users of high-end iPhones and Samsung Galaxy phones, users of mid-range and low-end phones upgrade to new phones less frequently.

FIH Mobile, a subsidiary of Foxconn that makes phones for Sony, Xiaomi and Lenovo, expects no profit in the first half of this year. All three smartphone makers saw their smartphone shipments decline in the first quarter. Although Samsung is still able to make profits by releasing high-end models ahead of schedule, it is also facing the embarrassment of sluggish market demand.

Japan Display shares fell as much as 4.3 percent in Tokyo trading, while Foxconn shares fell 1.1 percent after the company reported an 8.5 percent drop in April revenue.

In addition, TSMC also lowered its forecast for global smartphone demand in 2016 last month. According to Bloomberg data, TSMC's major customers include Apple, Qualcomm and Huawei.

4G and iPhone 7 bring hope

Of course, not everyone is pessimistic about the outlook for the smartphone market. Some optimists point out that users in developing countries such as India have not yet adopted 4G technology, which will drive demand for smartphones. TSMC expressed similar confidence last month, saying that mid-range phones with more powerful computing power and richer features will attract price-sensitive consumers in developing countries.

The next driver of smartphone demand could come in September, when Apple releases a new generation of iPhones, which historically have helped boost smartphone sales during the Christmas shopping season, thereby boosting the performance of mobile phone component suppliers.

However, there are still four months to September. Mark Li, an analyst at market research firm Sanford C. Bernstein & Co, said: "The cooling speed of the smartphone market may not be as fast as people worry, but the slowdown trend of the market is already obvious." (Li Ming)

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.