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Smartphone Market Continues to Struggle with 14.6% Decline in Q1 2023

Samsung Galaxy S23 review

The smartphone industry continues to face significant challenges, as a preliminary report from the International Data Corporation (IDC) indicates that worldwide smartphone shipments have declined by 14.6% year-over-year to 268.6 million units in the first quarter of 2023. This marks the seventh consecutive quarter of decline, as the industry struggles with low demand, inflation, and macroeconomic uncertainties. While the decline is more significant than the 12.7% IDC had previously predicted, the results are not surprising given the elevated inventory across regions.

Inventory has remained high across regions, but it is in significantly better shape compared to six months ago, thanks to reduced shipments and heavy promotional activities. Despite the inventory clearing and adjustment period, the market players remain cautious, deploying a conservative approach instead of dumping more stock into the channel to chase temporary gains in share. The research director with IDC’s Worldwide Tracker team, Nabila Popal, believes that it’s the smart thing to do if the industry wants to avoid an unhealthy situation like that of 2022.

The decline in smartphone shipments affected all regions, with almost all of them suffering double-digit drops in 1Q23. China saw a close to 12% decline, which was slightly more than expected, despite the recent reopening of the market. Consumers in China are prioritizing travel and entertainment over smartphone purchases, and uncertainty still lingers, dampening consumer sentiment. On the other hand, developed markets like the USA and Western Europe fared better than others, with declines of 11.5% and 9.4% respectively. Emerging markets like APeJC, CEE, and MEA saw larger declines of 17-20%.

On a positive note, recent discussions with OEMs and supply chain indicate that the smartphone industry is collectively gaining confidence that it’ll see a return to growth late this year and into 2024. The largest supply-side pullback in recent months was primarily those brands that serve the mid to low end of the market, where competition is high, and margins are low. Typically, these players are more hesitant to ramp back up again, but we are starting to see signs that optimism is growing amongst this crowd.

Read: Top 5 Smartphones Under Ksh 10,000 in Kenya

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