Once the physical and health impacts of covid-19 are mitigated and consumers return to work, school and life, what will be the outlook for for premium flagship devices versus more value based high end and mid tier.
This is a key question for global smartphone providers who will have seen the Q1 implosion of demand continue into Q2 and quite probably also Q3 of 2020.
2020 is supposed to be the take-off year for 5G with USA ramping in addition to the expected surge in China.
But with the almost incomprehensible human, emotional and economic toll of covid-19 still very much raw and ongoing, will we see a flight to safety, a flight to less exorbitantly priced smartphones? Or will the trend of the last few years of lengthening replacement cycles overall and diminishing perceived utility of each new generation persist?
In looking at the global landscape, I believe we will see:
- Consumers will face a tough economy with not all of the millions who have been furloughed or made unemployed able to find work work
- The leading global economies will be in recessions despite huge stimulus spend by governments and consumers will continue to feel deeply worried and anxious due to the fragility exposed by covid-19 which essentially upended every aspect of society.
- Consumers will likely be most hesitant in terms of big ticket spending (buying a home, buying a car, getting married) but undoubtedly will also reconsider their relationship with top of the line consumer electronics (be 8K Tv, expensive home entertainment systems, buying new expensive tablets or indeed flagship smartphones.) smartphones
Prior to covid-19 we had approx. 20% of customers buying smartphones with a wholesale price of $600 or more. This includes 5% buying the absolute top of the line flagships from Apple and Samsung. (SA Value ).
- However, over the last few years we have seen consumers push back against frequent replacement of their smartphones from both the premium end and also the mass market. Replacement cycles have gone from 30 months to over 40 months overall as a perceived lack of innovation and excitement alongside great performance from older devices meant that the need or desire to upgrade has been much less evident.
- With the added pressure of the economic, emotional and psychological toll from covid-19, will we see consumers abandon the flagship segment in favor of excellent devices in the wholesale price range $300-$599. Devices in this range currently account for 12% of global volume.
Although the flagship devices get lots of media attention, the real challenge for device vendors may well be convincing mid tier buyers ($100-190 wholesale) and high tier ($190-299) who represent 50% of total volume to venture out and buy a new smartphone.
SA recent research shows that approximately 1 in 5 US users are reconsidering their purchase of a new smartphone due to the covid-19 virus.
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Likewise a similar portion of US consumers are hesitating on their decision to adopt 5G. Strategy Analytics V-19 Awareness, Attitudes and Behaviors provides a comprehensive analysis of the impact on consumer lives in US, China and UK. https://tinyurl.com/sacv-19impct
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The consumer sentiment and reaction to covid-19 has been even more dramatic in china where 1 in 3 will reconsider their plans for a new smartphone.
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Key questions which need to be answered through ongoing tracking of consumer purchase trends and consumer include:
- Will the introduction of “value” based A- series devices and more affordable Apple iPhone (SE2) convince users to jump back on the replacement and new device purchase train? When? which segments?
- Which vendors will be most impacted by the expected flood of devices in the mid-tier and high tier segment in Q2-Q4?
- Will a portion of flagship buyers abandon the tier and trade down to still very feature rich and excellent performance devices? Who?
- What will the introduction of 5G versions of mid and high tier devices mean for the adoption curve in Q4?
- Will consumer confidence have returned sufficiently to take a leap of faith on 5G?
- With Samsung and Apple both looking to offset volume losses by dropping down a tier or two with better product backed by their superior marketing spend and brand loyalty, which vendors will suffer most? LG? Motorola? Huawei?
- For operators who see the need to freshen up their lineups both for 4G and 5G devices, which vendors will benefit most?
- Can TCL continue its impressive performance in US, W. Europe? Can Nokia (HMD) find a growth path?
- Outside of the US, can Xiaomi, Oppo take advantage of Huawei’s continued slide?