How will COVID-19 impact the future of the smartphone industry: round table

Adrian | Joshua | Peter | Cosmin

The coronavirus is an ongoing situation and it's impossible to know how it will play in the long term, but here are my expectations. We have seen Asian countries handle the situation with great urgency and the supply chain seems to be at nearly full capacity in the beginning of April. International travel will pose challenges to those countries, but if they can contain the virus, I expect the supply chain to retain capacity. 

I do expect, however, demand for phones to weaken considerably, and this would be the big concern over the next few months and likely years. I expect this to reflect particularly for higher-end phones that cost over $1,000, as users will reconsider whether a few incremental upgrades are worth a big premium. I expect this to result in more people keeping their old phones longer too.

How will phone makers react? The reasonable strategy would be for phone makers to double down on end-user satisfaction and work within their respective ecosystem with an offering of services and wearables / accessories that might open new or extend existing revenue channels. Favorable conditions on trade-ins, reducing prices to some extent, additional financing schemes are all tools that will help them maximize sales.

I do expect phone makers to also look more into health and wellbeing gadgets and services as demand for those has already increased. One example here is the Phone Soap ultra-violet lamp that cleans gadgets, a niche product that has witnessed unprecedented demand and orders now ship in June-July.

I also expect streaming services and gaming platforms to see usage increase significantly, especially during the winter months if the situation is not contained by then. We are in uncharted territory, but technology has been one bright spot that has kept us together and I expect its importance to only increase with this health emergency.

Georgi

The coronavirus pandemic has already shrunk and will keep shrinking the smartphone market over the next several months, if not longer. The worsened economic situation will keep people from spending money on smartphones they probably don’t really need. 

Manufacturers, however, can’t just sit around doing nothing, or at least not without pissing off their investors.

The way I see it, there are two routes phone makers can go:

1. Remain on their current development path but release devices at lower prices.
2. Release devices at current prices but improve the value proposition.

The first one is fairly obvious, you get your 15-30% performance improvement, perhaps another camera, faster refresh rate and it costs you $900 instead of $1,000. But what I’m expecting, or rather hoping to see is the second option.

Behind door number 2, we might find phones with some truly unique features. Now, I’m no smartphone engineer and I’m not sure what those might be, but I have some speculations about their type.

The way I see it, companies will come up with one or more semi-gimmicky features that perhaps require components that cost a few bucks or perhaps use the already existing hardware in new ways. Queue the fancy adds and other marketing tricks and suddenly: OMG! You just have to have that phone! Why would manufacturers lose 10% of their revenue when they can make people think they’re getting $1,200 value for $1,000?

I’m sure companies will do their best to avoid lowering prices after it took they worked so hard to make a thousand-dollar phone seem like something normal. And I think the pressure to keep their sales numbers up will result in some interesting phones.

Alan

So what happens when the clouds clear, the sun comes out and the global pandemic that shut down the world comes to an end? We should see some changes made in the mobile industry and this is how you might be affected.

First of all, the global economy will take time to recover and some businesses might not immediately rehire everyone they let go during the crisis. As a result, consumers are going to be very price sensitive. We could see more mid-range models released, but it wouldn't surprise me to see the pricing of flagship phones remain in the $1,000-$1,400 price range.

I really can't learn anything from the launch of the second-generation Apple iPhone SE and the unveiling of the OnePlus 8 series. My guess is that the pricing of these handsets would have been the same even if the COVID-19 outbreak wasn't keeping more than 22 million Americans unemployed.

Consumers around the world will hold on to their current handsets for longer than they might have otherwise, but manufacturers will continue to turn out updated devices at their usual times.

One important thing I see happening relates to how companies will deal with a pandemic in the future. Manufacturers will learn from the current situation and work out contingency plans for the future. These firms will start looking for suppliers in other countries in order to keep production going in the face of a future crisis.

Lastly, I wanted to touch on the tablet market (no pun intended). Tablets are suddenly in demand as more people work from home and kids are schooled at home. For the last few years, shipments of tablets have been falling. But more people are going to be working from home
after this pandemic ends and we could see a surge in demand for this product.

Mariyan

The world is a virus, and this serves as a wake-up call for many people, as well as phone manufacturers. On the one hand, it helps to show that there are far more important things than the camera count on the back of your smartphone. On the other, the looming recession and financial aftermath will probably force big payers to reevaluate things like expected revenues, sales, and dishing out pricy flagships twice a year. We might see a new wave of budget phones, and Apple is already riping that fruit with the iPhone SE 2020.

Developers now try to use every possible sensor and algorithm as a weapon against the COVID-19 disease.

The pandemic made people more health-conscious, too. I've never washed my hands so many times a day, and on my phone, there are quite a few health-oriented apps. Tracking body vitals is becoming well... vital. Developers now try to use every possible sensor and algorithm as a weapon against the COVID-19 disease. Tracking body temperature may become a thing in next-gen phones and wearables, while more health-centered features get baked in the core OS of the devices.

Adrian

You probably never expected to live in a world where larger crowds would gather on a daily basis at the toilet paper aisle of your local supermarket than to welcome the incredibly rare launch of a new low-cost iPhone, but here we are.

It was also pretty much guaranteed this time last year that the smartphone market would rebound in 2020 after a period of declining global sales and stagnant innovation thanks to the advent of 5G and foldable designs. That's clearly no longer the case, but as consumers rearrange their priorities, I'm afraid tech companies will eventually need to do the same.

Yes, I'm afraid of and not happy about that, because while giants like Samsung, Huawei, and possibly even Apple can weather the storm by reducing their marketing budgets and bringing flagship phone prices down to try to boost demand, others may have to throw in the towel.

I'm thinking primarily of HTC and Sony, but also LG and Motorola, all of which have had varying degrees of trouble staying relevant in the mobile industry of late. All of these companies have been bleeding money on smartphones for many years, and the coronavirus pandemic could force all of them to quit the losing game, drastically reducing Western competition as a direct result.

Joshua

Smartphone shipments are set to decline 15% this year and I believe the premium segment will be disproportionately impacted. Although the situation should improve in late 2020, I’m expecting Samsung, Apple, and others to avoid further price hikes and introduce some of the best trade-in offers ever with their next-gen flagships.

Similarly, those competing in the low-end and mid-range segments might temporarily forfeit some profit to lower prices and maintain their existing sales and market share levels.

But the biggest impact will be felt next year, in my opinion. Samsung and Huawei tried to create a new ultra-premium smartphone segment this year and the results, at least in Samsung’s case, have been quite poor so far. It wouldn’t surprise me if both brands (and any others thinking about doing the same) retreated from the segment in 2021 and accepted that most consumers aren’t willing to spend $1,400 on their next smartphones.

Peter

The COVID-19 pandemic will have a long-lasting effect on the smartphone industry. With unemployment and financial stability running amok, phone sales are likely to decrease for the foreseeable future, especially those of expensive flagships. People would either hold off upgrading their phones in the near future or they’d downsize to reasonably priced mid-range models. Manufacturers would certainly react to that trend and either rethink their pricing strategies or enrich their non-flagship wares.

Cosmin

The coronavirus outbreak has taught smartphone makers many things, including the fact that keeping all eggs in one basket should be avoided at all costs. Even if some countries are starting to see the light at the end of the tunnel, there are concerns that the second wave of infections might hit.

The smartphone industry has been heavily affected by the coronavirus pandemic and many companies are making efforts to move out of China. Dependency on manufacturing lines in China has led to major launch product delays and stock scarcity, so the first thing should address these issues is to relocate some of the product lines. However, a long-term solution to these disruptions in the supply chains hasn't been identified yet.

I believe the best way to protect against such threats would be to replace the human workforce with robots as much as possible.

Our lives after the coronavirus pandemic will never be the same and smartphone companies should start thinking on a longer-term solution to these very rare global events. This time, China was the first country affected by the pandemic, but next time it might Vietnam or another Asian country where smartphone makers are relocating some of their assembly factories.

I believe the best way to protect against such threats would be to replace the human workforce with robots as much as possible. It will eliminate a lot of the issues that many smartphone companies are facing when they're trying to move out of China. On the downside, a lot of people in industry-oriented countries will be jobless, so it's a double-edged sword that must be handled with care.