The virus will affect production in different ways: production will be lower due to the labour-intensive nature of the industry, to China’s delay in work resumption and population movement control, and to a reduction in the public’s willingness to buy. Another factor will be delays to the delivery of key components.
Still, there are a few positive notes: Q1 has always been seasonally weak for smartphone production. On top of that, manufacturers typically maintain a healthy inventory before the Chinese New Year. In that sense, as employees return to work from 10 February, the outbreak will not cause an immediate break in the supply chain.
Looking further to the future, developments will depend on the work resumption status of upstream supply chains and the import/export of goods through customs. Component shortages could become a more important issue, especially for active/passive components and camera modules, because of their low inventory levels or labour-intensiveness. Numbers for the second quarter will depend on the status of outbreak control and the degree of supply chain recovery.
In terms of the annual outlook, as long as the outbreak can be controlled and a basic level of demand can be supported by the overall global economy, demand should just be deferred rather than eliminated. So far, the outbreak should not lead to an overly pessimistic outlook for smartphone production in 2020, TrendForce said.
Samsung to suffer the least in Q1
Of the top six smartphone brands globally, Samsung will suffer the least in Q1, because its production is located in Vietnam and because its smartphones account for only 2 percent of the domestic market in China. Still, the company sources some of its components from China. This means its production forecast for the quarter has been reduced by 3 percent against the previous forecast, to 71.5 million units.
Huawei will already experience lower overseas sales due to the US ban. Leaning heavily on the Chinese market, the company sustained major losses under stagnant Chinese New Year sales numbers. The company’s production for the quarter is seen at 42.5 million units, down 15 percent from TrendForce’s previous forecast.
Third-place Apple made arrangements for its employees to work from home in an effort to reduce risks of infection, but this will have the side effect of slowing down the development of new iPhones in the second half, with component certification coming to a near halt. In the short term, Apple faces uncertainties regarding work resumption, and around the supply of certain key components involved in the production of new iPhones. These setbacks will directly affect the upcoming release of the iPhone SE2 (also known as iPhone 9). TrendForce has lowered its forecast for Q1 iPhone production by about 10 percent, to 41 million from 45.5 million units.
In fourth place, Xiaomi primarily relies on online sales, with a relatively low market share in China (9%). Compared to Oppo and Vivo, which have a domestic focus for sales, Xiaomi will not be as affected by the outbreak. The forecast goes down here by 10 percent, to 2.47 million units produced in the quarter, flat year-on-year.
TrendForce is lowering Oppo (fifth place) and Vivo’s production forecasts by 14 percent and 15 percent, to 2.4 million and 1.7 million units produced, respectively.
