Six takeaways from the smartphone market's Q4
Several of the world's top smartphone players reported their quarterly earnings this week and, in general, the news was not good. Overall sales were down, and many companies said they're tightening their belts to weather continued troubles in the months to come.
Specifically, new data from research and consulting firm Omdia shows that global smartphone shipments totaled 301.5 million units in the fourth quarter of 2022, a decrease of 15.4% compared to the previous year. Omdia and Light Reading are owned by the same parent company, Informa.
The situation is partly due to consumers' overall disinterest in purchasing new, expensive devices amid inflation and economic uncertainty. According to some new research from the financial analysts at LightShed Partners, sluggish smartphone sales could continue to drag on the US market for months to come as Americans hold onto their existing phones for longer and longer periods. And that could impede effort by US mobile network operators – including Dish Network – to put new 5G phones into customers' hands.
However, there may be a light at the end of the tunnel. "We expect the [global] market to remain under pressure until the end of the first half of 2023 and to start recovering thereafter," wrote analyst Harmeet Singh Walia, with Counterpoint Research, on the company's website.
Regardless, here are six takeaways from the smartphone market following the fourth quarter 2022 reporting season:
1. Apple's finances are down, but its market share is up
The iPhone maker announced its first quarterly revenue decline in nearly four years, blaming manufacturing disruptions in China in part for its muted results.
However, TechInsights estimated Apple shipped 71.1 million iPhones to reach the top spot in the global smartphone industry in terms of market share, with a record high 24% share. "Apple gained at the expense of leading Chinese brands who were hampered by sluggish performance in both home and overseas markets," according to TechInsights analyst Linda Sui.
Further, Apple's upswing corresponded with a decline in Android shipments. According to analyst Eric Smith with Strategy Analytics, Android market share fell to 48% globally, ending the full year below a majority market share for the first time since 2011.
"Apple also benefited from the premium segment, its primary constituency, being less severely affected by the economic and geopolitical uncertainties that marred the year. Moreover, mature smartphone users are now choosing premium devices that last longer," wrote Harmeet Singh Walia, with Counterpoint.
2. Employers are warning of possible layoffs
Apple officials said the company slowed hiring and could potentially reduce its workforce through attrition, noted the Wall Street Journal. Apple has so far managed to avoid the spate of layoffs affecting other big tech companies like Alphabet and Amazon.
"I view layoffs as a last-resort kind of thing," Apple CEO Tim Cook said, according to the WSJ. "You can never say never. We want to manage costs in other ways to the degree that we can."
Qualcomm officials said the chipmaker – which provides products to Apple, Samsung and other smartphone makers – is deploying similar tactics. "Given the current macroeconomic and demand environment, we're implementing further spending reductions and streamlining operations without losing sight of the significant growth and diversification opportunities ahead," Qualcomm CEO Cristiano Amon said during his company's earnings call this week, according to Seeking Alpha.
3. The Huawei factor
Qualcomm's Alex Rogers said the company hasn't been asked by the US Commerce Department to halt all shipments to Chinese vendor Huawei. That's noteworthy in light of recent reports that the Biden administration is working to completely cut Huawei from US suppliers over security concerns.
"Qualcomm has a set of licenses that we've had for a while that basically allow us to ship 4G and other chipsets, including Wi-Fi to Huawei. ... Those will continue for some number of years. And so, within the scope of those licenses, we don't see an impact," Rogers said.
Separately, according to Omdia, Huawei still holds its spot at tenth place in the global smartphone market, despite recording a fall in its quarterly shipments to 7.5 million, from the previous quarter's 8.6 million.
4. Samsung releases new Galaxy phones, albeit without satellite connections
Samsung this week released its quarterly earnings and also unveiled its newest flagship smartphone lineup, the Galaxy S23 series. All of the phones will feature Qualcomm's processors, a reversal from Samsung's previous efforts to use both Qualcomm products as well as its own Exynos chipsets.
"In Q1 2023, the newly announced premier line-up Galaxy S23 series will boost Samsung's shipment and profitability. We expect S23 series to hold well in Western countries but face intensified competition from Chinese vendors in emerging markets," wrote analyst Peng Peng of Strategy Analytics on the company's website.
However, the phones won't support connections to satellites, a new capability spreading among some phone and chipset suppliers. According to Cnet, a Samsung official called the functionality "too limited," but said the company will consider adding the feature in the future.
5. Americans aren't buying a lot of new phones
"The three national wireless operators in the United States all reported notable declines in their upgrade rates in the fourth calendar quarter. As a reminder, the upgrade rate is the percentage of the subscriber base that upgraded in that quarter, providing real data on [phone] replacement cycles," wrote the financial analysts at LightShed Partners in a note to investors. "We do not expect this downward trend to invert in 2023. If anything, we are probably too optimistic by not expecting a steeper decline in upgrade rates in 2023 as the US faces possible economic weakness."
The analysts also wrote that AT&T, Verizon and T-Mobile are all withdrawing from aggressive smartphone promotions. In addition, they noted the operators are shifting to phone payment plans that last three years, up from two years.
Those trends are important for all of the market's mobile network operators, given they generally work to get the latest and greatest phones into customers' hands. That way, those customers can access operators' newest network technology and spectrum bands.
The issue is critical for Dish Network, considering the company is hoping to put its Band 70 spectrum into action. That's difficult considering the spectrum is not supported by most existing phones, thus requiring customers to buy newer phones that do support that unique spectrum band.
6. Smartphone demand could pick back up at the end of 2023
"As the handset industry continues to experience reduced demand we are now expecting elevated channel inventory levels to persist at least to the first half of calendar 2023," said Qualcomm's CEO.
And, according to the WSJ, other chipmakers are looking for similar improvements in the second half of the year.
"It will take time for the market to recover, with an increase in shipments unlikely until at least the third quarter of 2023," said analyst Jusy Hong, with Omdia.
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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano
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