Deteriorating economic conditions have driven down global handset sales to their lowest level in eight years, says Counterpoint Research.

It calculates Q3 shipments totaled 301 million units, down 12% from a year ago. Another analyst firm, Omdia (a sister company to Light Reading), put the decline at 7.6%, although it said shipments were up 2.5% sequentially.

Counterpoint senior analyst Harmeet Singh Walia listed out the factors dampening sales: "Russia's escalating war in Ukraine, ongoing China-US political distrust and tensions, growing inflationary pressures across regions, a growing fear of recession, and weakening national currencies all caused a further dent in consumer sentiment, hitting already weakened demand."

Figure 1: Apple warns of delays after a Covid-19 lockdown hits production at biggest iPhone assembly plant.
(Source: Apple)

He said most major vendors continued to experience annual shipment declines, the one exception being Apple, with iPhone sales expected to lift the total smartphone market in Q4 following the iPhone 14 launch.

But that prediction no longer holds following the drama at the world's biggest iPhone plant, the Foxconn factory in Zhengzhou, central China.

Employees last week staged a mass breakout, one month into a mandatory COVID-19 lockdown, with social media airing claims of multiple deaths and unsanitary conditions in the dormitories.

'Significantly reduced capacity'

The slowdown at the factory, which employs 300,000 and accounts for 80% of iPhone production, has forced Apple to warn of a decline in iPhone shipments over the next few months.

An Apple statement issued Sunday said the plant was "operating at significantly reduced capacity."

It said iPhone 14 Pro and iPhone 14 Pro Max shipments would be lower than "previously anticipated and customers will experience longer wait times to receive their new products."

Apple is now restructuring its production and Foxconn Zhengzhou is offering the departed workers a 500 Chinese yuan (US$69) bonus to return to work, but it's not clear how long it will take for iPhone manufacture to return to full capacity.

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It is just one more incident that underlines the fragility of the global supply chain against the backdrop of the slowing world economy.

It's also a reminder that the smartphone upgrade cycles that telcos have been relying on are no longer what they once were.

As Counterpoint's Walia points out, we are now seeing the "slow but sustained lengthening of smartphone replacement cycles with smartphones becoming more durable and as technology advancement slows."

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— Robert Clark, contributing editor, special to Light Reading