The smartphone market is going through a downturn amid economic setbacks and channel inventory correction. Most analysts expect the downturn to linger for a while and this view was echoed by a corporate executive.
What Happened: The smartphone market might not regain momentum at least in the fiscal year 2022, which ends in March, and will likely extend to the next term, Norio Nakajima, President of Murata Manufacturing Co. Ltd. (OTC:MRAAY) told Bloomberg in an interview.
Murata, based out of Kyoto, provides electronic modules and components for Apple Inc.’s (NASDAQ:AAPL) iPhones, Samsung’s Android devices and leading Chinese smartphone manufacturers as well.
The executive clarified that Chinese smartphone demand has not come back online in full swing following the COVID-19-induced closure earlier this year. Consumers may have willingly lapped up new phones with even minor upgrades if the economy had been doing well, he said.
After the world emerged from COVID-19 in 2021, the markets and economies have been left to contend with incremental risks such as an inflationary environment that is eating away at wages and the monetary policy tightening by the global central banks.
“What I’m afraid will happen is smartphones get further commoditized and people will wait even longer before upgrading,” Nakajima told Bloomberg.
Despite best attempts by Chinese vendors to diversify sales out of China, they have been constrained by issues such as intellectual property infringement that is hurting sales in countries such as India, he noted.
Why It’s Important: The global smartphone market fell for the third straight quarter in the third quarter, according to estimates released by Canalys released earlier this week.
Shipments fell 9% year-over-year, marking the worst third quarter 2014 as consumers held back on electronic hardware purchases amid the gloomy economic outlook, the report said. The situation will persist for another six to nine months, analysts from the firm said.
The news does not bode well for device manufacturers, as they enter the key holiday selling season when they push out the bulk of their sales.
Apple is scheduled to report its third-quarter results on Thursday, after the market closes. The report will likely give further clarity on the state of the market, although Cupertino is widely expected to have pulled through the quarter with minimal impact due to strong sales of its high-end phones. This would have helped the company to offset any weakness in volumes.
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