Rising inflation, higher energy, and fuel costs have put pressure on consumers’ disposable income. This affects spending on electronic products such as PCs and smartphones. Therefore, smartphone sales show a decline.
Canalys posted a troubling report on the smartphone market for Q2 2022. Shipments between April and June fell 9 percent YoY after weaker demand, following economic headwinds and regional uncertainty.
Samsung remained the top manufacturer in Q2, while Apple reclaimed second place from Xiaomi after strong iPhone 13 sales, while Chinese manufacturers struggled at home.
According to Runar Bjørhovde, Research Analyst at Canalys, as quoted by GSM Arena, July 19, 2022, companies are facing sluggish demand, which causes them to have to rethink their quarterly strategy. Soaring inflation and stockpiles have resulted in manufacturers reassessing their portfolios for the remainder of 2022.
The 9 percent drop was also influenced by very high demand twelve months ago. There is pent-up demand, after a difficult 2020, while consumers’ income is currently shifting to other products and goods, not electronics.
Furthermore, research firm Gartner expects global semiconductor chip sales growth to slow in 2022 and fall 2.5% next year. The reason is because of the weak sales of cellphones and computers.
Gartner expects global chip revenue to grow 7.4% in 2022 to $639.2 billion, down from its previous forecast of 13.6% growth and compared with 26.3% growth last year.
For next year, Gartner expects chip revenue to contract to $623.1 billion.
“It could get a lot worse than that, but it will probably go down next year and then start to recover in 2024,” Gartner Vice President Richard Gordon said.
Higher demand for smartphones and PCs during the pandemic overwhelmed chip factories, led to shortages in other industries, raised prices, and delayed production.
However, smartphone shipments in 2022 are now expected to fall to 1.46 billion units from 1.57 billion.
“When millions of phones are removed from the market, the market turns into an oversupply, and chip prices tend to drop drastically,” said Gordon.
Against a backdrop of chip shortages, the European Union and the United States have also announced major subsidy plans to entice chipmakers, such as Intel, to build factories in their regions to reduce dependence on Asian suppliers.
Meanwhile, TSMC, the world’s largest contract chipmaker, and chip-gear maker ASML have reported strong results. And chipmaker Micron has warned of a cycle of declines.
Several global manufacturers, including Hyundai Motor Co, Nokia, and ABB, said they were seeing a reduction in chip shortages
“Supply constraints still exist in some sectors, such as 5G equipment, but the market should be in better shape in the first half of next year.”